Beijing’s silk market hosts innumerable crowded, noisy stalls selling decent replicas of Gucci sunglasses, Callaway golf clubs, and Polo T-shirts, all at a fraction of what the real thing costs. If you don’t mind an upside-down logo or misspelled brand name, the value is terrific.

However, if you turn up your nose at such inaccuracies, you are likely to be invited into a narrow five-floor tenement some 200 yards away, where the hallways smell of yesterday’s fried rice, or worse, and where underfed youngsters cower behind dark doorways.

On the top floor, a password is exchanged, and the door opens onto a room stacked with Chanel, Prada, Hermes, and Louis Vuitton handbags. Either they are excellent knockoffs, or they are the real thing, dividends of the so-called “fourth shift” unrecorded production phenomenon. It’s impossible to tell, but one thing is for sure — they are illegal.

The sellers of these goods make a big production of slinking around to avoid the authorities, communicating by cell phone, and doing business in stairwells to avoid scrutiny. But is all that for show? It’s hard to imagine the police are that clueless, since nearly anyone with a wallet and a heartbeat can gain access to these goods. China has committed to upholding intellectual property laws and stamping out fakes, but most observers say that the counterfeiting tsunami is only getting worse, and that its epicenter is China.

Steve Powell, general manager for security solutions at the Eastman Kodak Company, says “China wants to keep those factories going,” and that pragmatic answer is probably correct. The need to supply jobs to the millions migrating to China’s cities appears to overwhelm the authorities’ commitment to the World Trade Organization.

Designer goods are just the tip of the iceberg. Sales of all counterfeit goods are estimated at more than $600 billion annually, up from $5.5 billion in 1982. Mr. Powell says that sales of counterfeit pharmaceuticals now total some $70 billion a year worldwide. Some 35% of the software installed on computers in 2005 was fake, more than $12 billion in copied auto parts are sold annually, and there have been more than one hundred airline crashes caused by fake (and faulty) parts. This is a serious and huge business, threatening the health and safety of people everywhere.

What can be done? One approach is that of Valerie Salembier, publisher of Harper’s Bazaar, who has launched an advertising campaign, “Fakes are Never in Fashion,” to raise consumer awareness of the problem. The ads link the counterfeiting of luxury goods to child labor, drug trafficking, and terrorism. Describing the horrors of 8-year-old children chained to machines and sleeping on wet floors, she says, “I know it sounds melodramatic, but it’s true.” She also says that the connections with terrorists are solid. She points to the 2004 Madrid train bombings as one instance where the money trail led directly to forgers.

Ms. Salembier, who chairs the New York City Police Foundation, a by-product of her “huge lifelong interest in law enforcement,” has worked with New York City’s administration to enact stiffer penalties against those who abet counterfeiters. For the luxury goods advertisers in her magazine, this is, she says, the number one problem.

Has the campaign had any impact? “There’s no question about it,” she says. “Three million women read this magazine. We get mail all the time saying, ‘I had no idea that my purse parties could fund child labor.’ It’s our signature issue; I’m so proud of it.”

At the other end of the spectrum are a number of companies trying to win a share of the $1.5 billion and growing anti-counterfeiting industry. Of the several participants, most of which are less than five years old, Kodak seems to be on the cutting edge.

Kodak infuses proprietary materials, described by Mr. Powell as “robust, very small particles,” into inks, varnishes, and other substances used in making labels, price tags, or packaging. The substance is used in such small quantities as to be undetectable, except by a handheld scanner. The beauty of the system is that a customs agent, or an employee inspecting merchandise in a warehouse, can instantly get a read on whether a product is real or fake. So far, the counterfeiters have not cracked the code.

Kodak’s customers can’t crack the code either, as they don’t know the composition of the substance. Kodak helps implement the use of the product, and works closely with manufacturers to design its application. One of Kodak’s pharmaceutical customers called Mr. Powell last week to say that of all the products on the market, only the Kodak system was undetectable by recent laboratory tests.

Why this surge in fakery? “Without a doubt, the growth of counterfeiting has been caused by easy access to high-quality scanning, computing, and printing” says Mr. Powell. “It is so easy to scan in a label and send it to an unscrupulous commercial printing operation, and suddenly you have millions of labels. Also, the globalization of supply and distribution channels has helped. There are a lot of links in the supply chain.” In other words, there are a number of folks along the way who might be tempted to turn out some fakes to pad their own bottom line.

Mr. Powell cites one trade organization that projects industry spending to fight piracy will climb to more than $10 billion annually by 2012. This is a luscious plum for companies that can outwit the frauds. Mr. Powell says that even though no one has figured out Kodak’s material so far, his company is working on the next generation. “We know we have to stay ahead.”

Like Ms. Salembier, Mr. Powell thinks the more light shed on the issue, the better. “Companies should be proactive,” he says. “They should tell people about it. So many companies think that saying there’s a problem is a sign of weakness. Counterfeiters look for the weak underbelly.”

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