The story
Shanzhai (山寨) means a mountain stronghold. For centuries it was the word for the fortified hideouts where outlaws lived beyond the reach of the authorities, and the best known are in Water Margin, the classic novel whose rebel heroes gather in a bandit camp in the mountains.
The modern sense arrived by way of Cantonese slang, in which a shanzhai factory was a small, badly equipped family workshop. In the 2000s such workshops in the Pearl River Delta turned out cheap DVD and MP3 players, then mobile phones that looked remarkably like famous brands. By the end of 2006 those phones were estimated to hold around 30 per cent of China's domestic market, and by about 2008 the word was everywhere.
What separates shanzhai from a plain fake is the attitude. A counterfeit wants to fool you. A shanzhai product often did not bother: buyers knew what they were paying for, and the makers sometimes added features the original lacked. The word stretched to parody as well, including home-made versions of the national New Year television gala. Some people now use it with a certain pride, for cheap and cheerful ingenuity from below.
English has knock-off, and that is the honest answer. But a knock-off has no outlaws in it. Shanzhai keeps a whiff of the mountain camp: cheeky, a little rebellious, and not especially sorry.