Commentary on Political Economy

Wednesday 1 May 2024

 

How China’s ruling party fuels the U.S. fentanyl crisis

Demonstrators observe a moment of silence for fentanyl victims in D.C. on Sept. 17, 2022. (Eric Lee for The Washington Post)

Fentanyl kills more than 200 Americans daily, the equivalent of a full passenger plane crashing and killing everyone aboard every single day. And we know that China plays a surprisingly central role in this tragic scenario.

As Anne Milgram, head of the Drug Enforcement Administration, noted last fall, nearly all fentanyl precursors come from the People’s Republic of China. But knowing the source is not enough. The families of fentanyl victims are owed an answer to a far more important question: why?

Why are all these drugs coming from China?

bipartisan investigation by the House Select Committee on the Chinese Communist Party offers the answer. It reveals that the Communist Party essentially pays Chinese companies to send illegal synthetic narcotics such as fentanyl and fentanyl precursors — the chemicals the Mexican cartels require to manufacture fentanyl — abroad.

Our investigation delved deep into the Chinese internet and government websites, noting more than 37,000 unique instances of Chinese companies selling narcotics online and conducting undercover communications with Chinese drug-trafficking companies.

Shockingly, we learned that China’s ruling political party subsidizes the fentanyl crisis through government programs, protects fentanyl traffickers operating within its borders and allows sales of deadly substances on Chinese e-commerce websites.

The party provides subsidies in the form of rebates for the value-added tax, or VAT, to companies that manufacture fentanyl analogues, precursors and other synthetic narcotics, so long as the products are sold outside China. The Communist Party uses VAT rebates to dramatically increase exports of other goods, and we now know that it has created distinct rebate categories for entire classes of illicit synthetic narcotics. All companies in China are eligible for this national subsidy, giving them a strong incentive to produce these illegal narcotics for sale abroad. Our committee uncovered leaked internal documents from Gaosheng Biotechnology, a chemical company selling subsidized synthetic narcotics, bragging that its products were tax-exempt. The Chinese government hid this program from their U.S. counterparts for years during negotiations on the fentanyl crisis.

And these subsidies work. For example, in an analysis of online sales, we found that Chinese companies sold subsidized cannabinoids, another form of synthetic narcotics, at a rate up to 20 times greater than sales of the majority of similar drugs. The vast majority of the subsidized drugs we uncovered are also illegal to produce or sell in China, meaning the Communist Party is currently subsidizing a criminal act under its own laws.

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We also found evidence that the Chinese government owns and rewards companies engaged in illicit drug manufacturing and trafficking. We uncovered that Yafeng Biological Technology, which sells synthetic opioids on more than a dozen websites, is owned by a Chinese government prison connected with human rights abuses.

The committee also used web-scraping and data analytics tools to review the content of seven e-commerce sites that routinely host Chinese companies selling illicit narcotics. We identified more than 2,048 Chinese companies offering over 31,000 sales of illicit narcotics or substances. These companies’ sales pages included clear indications of drug trafficking, with advertisements that appeared to cater to non-Chinese customers. And while China aggressively prosecutes drug trafficking within its own borders, it thwarts attempts by U.S. law enforcement to bring accountability to those responsible for killing Americans.

In 2022, more than 76,000 Americans died from fentanyl overdoses. China, according to its government, had zero fentanyl deaths.

If we want to protect Americans from the fentanyl epidemic, we must target the Communist Party’s fentanyl export industry at its source. That means exploiting the illicit fentanyl trade’s Achilles’ heel: The Chinese chemical companies fueling this crisis often have significant legitimate business interests. Shanghai Ruizheng Chemical Technology, for instance, sells deadly drugs across the internet while also peddling benign products such as food additives and rubber material intermediates on its website.

Most of these companies appear to rely on legitimate commerce to maintain profitability, with drug trafficking serving as a lucrative side hustle. That makes them uniquely vulnerable to U.S. economic tools such as sanctions. We must present these chemical companies, along with the various entities that support them, with a choice: End their role in selling fentanyl precursors, or face crippling sanctions.

We must also combine our law enforcement, intelligence, economic, trade and diplomatic authorities under a new and nimble anti-opioid task force that uses streamlined processes to target the weak points in the fentanyl supply chain. We must enhance international law enforcement cooperation.

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We must crack down on the money-laundering practices that fuel this industry, the Chinese payment apps that enable illegal profits from this toxic trade to make their way back to China and the Chinese e-commerce platforms that host companies openly selling these narcotics. We must also reform the de minimis tax exception — the rule that allows imports worth less than $800 to enter the United States without duty — that has allowed countless fentanyl shipments to evade customs inspections. And we must create a right of action that allows victims’ families to hold those responsible in China to account.

By taking decisive action now, we will honor the fallen and their loved ones, and better protect Americans from the scourge of fentanyl.

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