There’s a furiously healthy grey market in the iPhone in China — we wonder how it works? Turns out it is quite complicated, involving early morning queues at US Apple Stores, backstreet sales deals at stores in Chinatown, unlocking, shipping and later sale in China, where the devices actually get made.

The interesting tale is available at the New York Times, which tells us it works like this: “People wait in line at an Apple store to buy the newest iPhone for $600, paying a premium to skip the AT&T contract. They then sell the phones to middlemen, usually at electronics stores in Chinatown, for about $750.”

Once the iPhones reach China they sell for as much as $1,000; but this thriving little industry is set to collapse when the iPhone 4 hits China this weekend.

Apple’s attempts to thwart this trade have failed so far: it has had challenges refusing to sell phones to Asian customers, for example, and its two units per credit card scheme is also easy to avoid.

But for low paid Chinese workers this trade could be a god send:

““Many workers make a few dollars an hour working in restaurants or factories,” he said. “If they wait in line for an hour at the Apple store to buy and sell phones, they can make $300 in a single morning.” For many, he said, this is equivalent to an average week’s pay.”

Enlightening report, take a look.

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