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Typically customs won't confiscate a single item brought home by a tourist although in a strict sense they could. They regularly confiscate shipments of fake goods coming into ports. We saw a group of street vendors running at top speed carrying their wares in blankets, presumably being chased by the police. After seeing that, I personally wouldn't risk buying from them. However, you'll find street vendors selling them in any of the larger tourist centres.
Guangzhou is the main distribution center for replica designer bags, but most of the products are produced in the north of China. Fake handbags are used to fund all sorts of nasty shit. I sell preloved designer handbags (insured/taxed/VAT registered etc) and some Mulberry that retail for £1295 now sell for £500. For £200 you could get a mulberry, Kate Spade, Hill &