Nangong's charges came after a crackdown some years earlier which targeted similar business practice, which targeted the Asian tourist market, the court heard.
Many of the products were said to contain various amounts of alpaca wool but analysis proved those percentages were vastly inflated.
Indeed most had no trace of alpaca in them, Ms McClintock said.
They were labelled as being "made in New Zealand" when in fact they were made in China.
She said Hou was "intimately and personally involved" in the crimes.
He would import the products and sew the labels into them himself.
"New Zealand was all over these products and he knew they weren't from New Zealand because he bought them from his sister in China," the prosecutor said.
Ms McClintock told the court it was not one-off offending and that Hou had been spoken to numerous times by the Commerce Commission about his business activities.
He was originally spoken to in October 2011 and given "educational material" in Mandarin. He was warned again about his trading at least twice after complaints about his products and the commission had been told his staff were also verbally misinforming clients.
"There can't be any doubt this was deliberate conduct," Ms McClintock said.
Defence lawyer Patricia Finau applied for a discharge without conviction on Hou's behalf, saying there may be an impact on his ability to travel to China if he had a black mark on his record.
She also provided to the court affidavits from another Chinese businessman who discussed the "cultural shame" that came with a conviction,
Hou's business may subsequently be shunned, which would have a knock-on effect for his wife and four children for whom he was the main provider, Ms Finau said.
Her client honestly believed he was entitled to label his products as being made in New Zealand because he was putting the finishing touches on them after they had been imported.
His limited English was a factor in the offending too, she said.
However Judge Josephine Bouchier was not convinced the consequences of a conviction for Hou were out of all proportion to the gravity of the offending; and accordingly rejected the application.
"A long history of warnings"
• Oct 2011 - The Commerce Commission spoke to Hou about wool content of duvets and provided Mandarin-language information about the law
• June 2012 - After a complaint he was spoken to by the commission about country-of-origin labelling
• Sept 2013 - He was interviewed and a compliance advice letter sent after incorrectly telling customers rugs were New Zealand made
• Oct 2013 - The commission sent a "please explain" letter concerning alpaca duvets
• Nov 2013 - Another compliance advice letter was sent to Nangong regarding labelling accuracy
• Jan 2014 - Sept 2014 - Offending occurred for which charges were laid
