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Have you been sitting around wondering why Apple’s launch of the iPhone in China has gone so miserably?  Me neither.  But here’s the answer anyway: it hasn’t.  Chinese consumers are buying plenty of iPhones, but because the official China Unicom version has WiFi disabled, they’re mostly buying them on the gray market instead:

They are for sale at stalls in every cybermall and market in every Chinese city, and come in two varieties: The most expensive ones (at around 6000 RMB in Shanghai for a 16GB 3GS, or 880 USD, depending on your haggling skills) come directly from Hong Kong, where the factory-unlocked model is available from the Apple store for around 4800 RMB….The distribution model is extensive and robust, and in fact most Chinese buy their mobile phones from stalls like this. There are no iPhone shortages, as prices fluctuate to meet demand. The received wisdom is that around 2 million iPhones are in the Chinese wild; I’ve personally seen a good many of them here in Shanghai, where they are much in evidence among the eliterati.

….China Unicom stores all have iPhone banners up; I’ve passed several China Unicom road shows stopping by Shanghai extolling the iPhone. The iPhone is being talked about widely. But so is the fact that the China Unicom iPhone is crippled — the Chinese are sophisticated consumers; forget this at your own peril.

The upshot: anecdotal reports tell of aftermarket prices increasing for Hong Kong iPhones these past few weeks, as demand increased. Clearly, the advertising is working, even if China Unicom’s sales of wifiless iPhones are anaemic.

So: Apple has done an official deal with China Unicom, which isn’t producing much in way of official sales but is producing increased marketing and awareness.  Apple’s hope, apparently, it that eventually the whole situation will get a little too ridiculous and the Chinese government will cave in to public pressure.  Then they’ll start selling unlocked versions through official channels and make a ton of money.  Now you know.

(Via Felix Salmon.)

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Corrupt leaders the world over can (and will) try to shut down the truth, but when the truth has millions of people on its side, you can't keep it down for good. And there's no more powerful or urgent argument for your support of Mother Jones' journalism right now than that. We need to raise about $450,000 to hit our online fundraising budget in these next few months, so please read more from Monika and pitch in if you can.

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