Shanzai

How to Lose Your Startup to the CCP in 10 Easy Steps

How to Lose Your Startup to the CCP in 10 Easy Steps

It begins with innovation.

A lone entrepreneur or a small team invents something brilliant—a sleek gadget, a clever tool, a stylish product. They pour months, maybe years, into prototyping, refining, and engineering it for mass production. There’s interest. There’s a market. There’s buzz.

Then they hit a wall: manufacturing.

Getting it made in the U.S. costs $60 per unit. A factory in Shenzhen quotes $5. The margins don’t lie. They make the call. Tooling is sent overseas. The contract is signed. Production begins.

Six months later, 50,000 units arrive. The launch goes live. Orders start rolling in. Momentum builds. The product seems to be a success.

Then, the complaints start.

Customers report parts breaking, batteries dying, adhesives failing. This isn’t the product they approved. It’s been changed—quietly, subtly—at some point between the prototype and mass production.

The founder calls the factory. Emails bounce. Their contact vanishes.

And then, the gut punch: the product shows up on Amazon. Not under their name, but under a made-up brand. Same product. Same design. But this version works. It’s cheaper. It ships faster. And it’s climbing the algorithm, devouring their listing in real time.

So they contact a Chinese attorney to initiate legal action. The lawyer laughs.

“You don’t own the tooling,” he says.

“You never filed a design patent.”

“They didn’t steal it. You gave it to them.”

The startup runs out of money. The founders shut down the company, sell whatever intellectual property they can salvage, and take a job in insurance.

This is not a hypothetical. This is a pattern. A quiet epidemic in the global startup ecosystem—especially among American direct-to-consumer brands and hardware entrepreneurs.

Real Stories, Real Consequences

Take Brush Hero, a water-powered cleaning device that found success after appearing on Shark Tank. As their business took off, so did the number of counterfeit products—identical in design but manufactured cheaply and sold on Amazon under fake brand names. Customers who unknowingly bought the counterfeits left poor reviews, damaging Brush Hero’s reputation. The company lost market share not to competitors, but to their own supply chain.

Or look at Temu, the Chinese e-commerce platform now cloning entire Amazon storefronts—product by product, image by image. Some sellers have found their entire listings lifted wholesale and relisted on Temu, where the same factories offer cut-rate versions of their original products.

This phenomenon isn’t just an accident. It’s a feature of a system designed to absorb foreign innovation, reproduce it at scale, and then crush the originator with its own creation.

In China, it’s known as “shanzhai”—a term that once referred to counterfeit goods, but now functions as a kind of informal R&D pipeline for global consumer markets.

This Isn’t New

The Clinton administration in the 1990s oversaw the transfer of missile guidance systems, stealth materials, and dual-use satellite tech to Chinese companies. American firms, hungry for market access and campaign dollars, facilitated China’s rise in the name of globalization. It was framed as capitalist engagement. In reality, it was strategic compromise.

Today, that legacy lives on—not just in Huawei towers and DJI drones, but in every Amazon seller who gets undercut by their own supplier, every Kickstarter campaign cannibalized before it can scale, every founder crushed by a system they thought they understood.

A Candid Admission

In 2020, Professor Di Dongsheng, a Chinese Communist Party insider and professor at Renmin University, gave a speech in Beijing. It was never meant for Western audiences—but it leaked.

He bragged that China has “old friends” in America’s “core inner circle of power,” particularly on Wall Street and in Washington. These friends, he said, had been instrumental in helping China navigate diplomatic tensions for decades.

“We have people at the top,” Di said plainly.

“Between 1992 and 2016, we were able to settle all kinds of issues… because we had people at the top.”

“Wall Street had a very profound influence over America’s domestic and foreign affairs.”

He went on to lament that these channels stopped working under Trump:

“After 2016, Wall Street couldn’t fix Trump.”

The video was scrubbed from Chinese platforms. YouTube links vanished. But the confession remains, thanks to journalists like Jennifer Zeng, who translated and analyzed the speech on her blog and on YouTube.

This Is About Sovereignty

Entrepreneurs must understand: your supply chain is not neutral. When you send your designs to a geopolitical adversary with a track record of intellectual property theft, don’t be shocked when your innovation becomes their empire.

The CCP doesn’t need to hack you. They just need to build your product better, faster, and cheaper—then bury your brand in the algorithm.

This isn’t just about startup failures. It’s about national resilience.

We handed over the machinery of innovation to the lowest bidder. And now we’re paying the highest price.