China is impervious to Apple iPhone’s charm. Apple’s local partner, China Unicom, has only sold 5,000 units since the iPhone debuted in the country last week, according to reports. What’s going on? Some observers blame the iPhone’s high price. But consultant iSuppli points fingers at a different culprit: The Chinese gray market for the iPhone.

Tiny only a few years ago, China’s gray market is now huge, it now accounts for nearly 13% of all legitimate global cell phone-sales. And total gray-market handset shipments are growing fast, expected to reach 145 million units in 2009, up 43.6% from 2008, according to a Nov. 3 iSuppli report. In contrast, worldwide unit shipments of legitimate cell phones will drop 8% this year, according to iSuppli. “Chinese gray-market handset suppliers have become so successful that they are grabbing share from major international handset [manufacturers],” says Kevin Wang, director, China Research, for iSuppli. And Apple is one of the manufacturers suffering as a result. While Apple waited to introduce the iPhone into the Chinese market, Chinese gray market vendors have filled in the gap with cheaper iPhone-like devices. So now, the locals see no need to rush out and buy the real thing.