This project is an analysis of how Chinese counterfeiting and cloning affects high tech products. It provides a thick description of the concepts and context of Intellectual Property (IP) infringement and cloning in China. The analysis is based on a theoretical framework consisting of three classic organizational economics theories Transaction cost economics, Agency theory, and the Resource based view theory, as well as four strategies for dealing with Chinese counterfeiters developed by the consulting firm A.T. Kearney. The purpose is to analyze and predict what would be the likely outcome if Apple Inc's iPhone product entered the Chinese market. A four stage causal chain is developed to test the result. It is concluded that Apple's iPhone product will enter the Chinese market in 2009 and would be most likely to use an outpacing strategy which is likely to be successful if contingent factors do not occur. However the project also finds that numerous contingent factors are likely to occur due to among other factors Apple's supply chain. Cloning of the iPhone product by Chinese cloners is therefore likely to present a serious threat to Apple inc. in the Chinese market.