Narcotics trafficking in China: size, scale, dynamic and future consequences.

1. General Overview

Narcotics abuse and trafficking are not new developments in China. They have been part of China's history even prior to the Boxer Rebellion and the first British Opium War in the mid-1800s, as the People's Republic of China's (PRC) sheer size and geography has traditionally made it a likely victim of drug trafficking. (1) Today, largely because of China's increased trade and commercial interests with Southeast Asia, a loosening of travel restrictions within China, increased urbanization, longer work hours, and the gradual development of a more consumer-oriented society, the PRC has become a major transit point not only for narcotics bound for other Asian nations, but also for North America, Russia, Europe, Africa and Latin America. (2) The repercussions for China have been severe. According to the UN, the PRC produces 50 percent of methamphetamines (AST) in Asia, with most of this production occurring in the southeastern Guangdong province. (3) AST drugs include methamphetamine hydrochloride (shabu) and crystal methamphetamine (ice), with much of it supplying markets in the Philippines, Japan and South Korea before entering the global trade through contacts with the Chinese diaspora. (4) Further, over one million people are estimated to be involved in organized crime in China and it has been said that Chinese drug markets earn billions annually from the trade. (5)

Opium and its more highly refined cousin, heroin, are the modern-day drugs of choice, with the Chinese government alleging that 98.6 percent of its drug addicts use heroin. (6) Further, Wardlaw asserts that China "will probably be adequately supplied" by heroin sources in Burma, Afghanistan, Pakistan, Kazakhstan, Tajikistan and North Korea. He goes further to state that with current Chinese policy, heroin consumption in the PRC is on pace to reach "alarming" levels. (7) Also troublesome are the predictions by some that claim that AST drugs are likely to eclipse heroin and Opium due to their wider availability and cheaper prices. (8) It is noteworthy that although the majority of Chinese heroin is imported, a substantial portion of Chinese AST is both produced and consumed locally. (9) PRC has also become a major producer of precursor chemicals such as acetic anhydride, potassium permagnate and ephedrine, despite the creation of a system that gives pre-export notification of dual-use chemicals. (10) In addition, senior Chinese law enforcement official Yang Fengrui has stated that ecstasy has begun to spread at a tremendous speed and poses a serious threat to stability. Also troublesome is the fact that Fengrui feels that there is still a large, untapped market of potential users. (11)

2. Problem Spot: The Gateway to China

Many of the narcotics that transit or are consumed in China come from China's southern provinces of Yunnan, Guangdong and Fujian, Hong Kong and Macao, and its Southeast Asian neighbours, namely Burma. However, the other members of the Golden Triangle (Thailand and Laos) are still actively involved despite recent lulls in activity. The PRC shares a 2,000-kilometre border with Burma, thus resulting in China serving as a major transit route in addition to a source of consumption. (12) Some estimates suggest that there are now tens of millions of drug users in China despite official claims that there are only about 790,000. (13) Further, officials have admitted that drug consumption and abuse, especially of AST drugs, has spread to all of China's provinces and every major urban area. (14)

Most heroin enters into China from Burma's Shan State and United Wa State Army-controlled border areas. (15) From Burma, ethnic Chinese direct the transportation of heroin into Yunnan (where 80 percent of addicts support their habit through criminal activity and 40 percent of crime is drug related) and are sent to other provinces, specifically Guangdong and Fujian, by trawlers, trucks, railways, mail, and even airplanes. (16) Burmese heroin is also trafficked to Hong Kong in Thai civilian fishing boats that meet at rendezvous locations in waters near Hong Kong. Heroin is then transferred from the Thai fishing boats to local fishing vessels who then bring it to Hong Kong. As there is a large volume of sea traffic in Hong Kong on an everyday basis, this is a relatively low-risk method of smuggling. (17) In addition, Chinese authorities claim that there are crucial transit routes through Fujian. As a result, top officials in Beijing view China's southwestern border as their greatest cause for concern and most law enforcement efforts have been confined to these areas at the expense of other regions and domestic production. (18)

Many smugglers of Burmese heroin are ethnic Kokang, Yunnanese, Fujianese, or members of other ethnic Chinese minority groups that reside outside of China in places such as Burma, Cambodia, Canada, Hong Kong, Taiwan, Thailand and the United States. (19) Contrary to popular belief, these traffickers are not members of organized criminal groups such as the Triads, but are often individuals who work with family members or form networks with friends or other trustworthy social contacts. Further, most narcotics transported from Burma are intended for the Chinese domestic market. However, due to international pressure and China's harsh anti-drug policies, the scale of opium production has been reduced in Burma, thus raising doubts as to whether Burma will be able to provide a sustained supply of heroin in the future because of high prices. Nonetheless, although the heroin supply has decreased, the production of amphetamines has increased, with hundreds of millions of tablets being produced in Burma every year as AST drugs have become increasingly popular with urban youth in China. (20) Fengrui alleges that because of this increase in AST trafficking to south China, foreign syndicates have begun to operate in China and that some drugs that have either been manufactured in or trafficked to China are now being sent on to the international market, some of which make it all the way to Europe. (21)

Past foreign policy decisions by Beijing have contributed to the PRC's current dilemma. China began selling Burma large amounts of weapons in 1990, largely because Beijing was eager to win allies following the Tiananmen Square crackdown in 1989. (22) These arms deals to the already isolated Burmese junta helped guarantee that Burma remained underdeveloped and that an environment conducive to narcotics trafficking continued to exist; the weapons preserved a military regime that did not understand how a modern economy functions. (23) Further, some of these weapons undoubt edly made it into the hands of the United Wa State Army, a major Burmese cartel that claims to have its roots in fighting Naypyidaw, Burma's recently established capital, for greater autonomy. The Burmese military engaged in extensive military operations against ethnic minorities in the border region with China and experienced several rather sound defeats, thus giving rise to the belief that the United Wa State Army seized sizeable amounts of Chinese weapons.

The outlook for Burmese trafficking in China is grim. It seems that China will continue to serve as a transit country, as demand shows no signs of slowing and Chinese law enforcement currently lacks the ability to effectively combat these activities. (24) Counter trafficking successes in Southeast Asian nations such as Thailand (largely through crop substitution programmes) have also greatly encouraged the formation of alternate routes through China, and it has been reported that banks and companies in Guangzhou, the capital of Guangdong, have begun to launder proceeds from drug transactions. Some of this laundered money is believed to have been used in legitimate investment projects in Fuzhou City, Shanghai and Beijing. (25) In addition, new routes have been formed in other nations within the Golden Triangle, the most pressing of which is arguably the section of the Mekong River which runs through Laos, as it is only patrolled in a few areas while many drug-producing regions in the north of the country are virtually inaccessible to Laotian authorities. (26) Nanning is also a Chinese city that has increasingly been identified as an emerging destination for Burmese narcotics. (27)

Hong Kong is a serous source of concern for Beijing because it has become increasingly involved in heroin smuggling as the price per gram has fallen from US$58 in 2000 to US$41 in 2005. Due to this drop, much of the heroin that was originally destined for lucrative overseas markets is now consumed domestically or channelled to wealthier Asian states. In Hong Kong, many syndicates have forged partnerships with other criminal networks in Colombia, Burma, the Philippines, the Netherlands and Australia. (28) Hong Kong has also been reported to have become involved in the trafficking of ecstasy, although its involvement is not believed to be extensive. (29) However, AST production facilities have begun to appear' in Guangdong and Fujian and there are signs of increased flow into Hong Kong. In response, the National Narcotics Control Commission (NNCC) and the Hong Kong Standing Committee on Drug Control have made efforts to increase intelligence sharing, enforcement cooperation and joint training. (30)

Macao, the PRC's other Special Administrative Region, has emerged as a major money laundering centre, largely because of its free ports, lack of foreign exchange controls, significant gambling industry, and a law enforcement system that is in a current state of flux as it undergoes reorganization. Geographically, Macao is a "gateway to China" and can be used as a transit point for illegal proceeds both to and from China, Hong Kong and other Asian nations. (31) Macao's gaming industry accounts for 40 percent of its GDP and money laundering through these activities remains significant despite the relatively small size of Macao's economy. This is likely because organized criminal groups engage in racketeering, loan sharking and prostitution, and control many high-end game rooms. (32)

Perhaps Macao's strongest response to accusations of being a safe haven for money laundering is the Financial System Act. The statute requires mandatory indemnification and registration of financial institution shareholders, customer indemnification requirements, and external audits that can involve review of compliance with anti-money laundering statutes. Further, the measures apply to all credit institutions in addition to branches of credit institutions headquartered overseas. However, despite existing on paper, these measures have had little success on the ground as active enforcement has still not been fully implemented. After receiving criticism from the Asia-Pacific Group on Money Laundering (APG) and the Offshore Group of Banking Supervisors (OGBS), Macau has begun to engage in further reforms. These reforms now include establishing a financial intelligence unit, drafting and distributing updated anti-money laundering guidelines to banks, money changers, and remittance agents, and starting an anti-money laundering public awareness campaign. Nonetheless, much like previous paper measures taken by Macao, these will not be successful unless effectively implemented. Steps must be taken to ensure that adequate structure, training and resources are put into place to fully enforce these new regulations and reforms. (33).

3. State-Sponsored Trafficking: Pyongyang

There are several cases of government-funded narcotics trafficking in the world today, but none as glaring as that of the Democratic People's Republic of Korea (DPRK), or North Korea. Unfortunately for China, the DPRKis an immediate neighbour, shares a significant border with the PRC, and Beijing views Pyongyang as an ally, although the strength" of the alliance is a source of considerable debate. Nonetheless, many of the narcotics in northeast China likely come from North Korea, despite denials from Chinese officials (34).North Korea has no viable economy of any sort and in 2001 DPRK exports from legitimate business totalled a dismal US$650 million, whereas profits from illegal narcotics trafficking netted up to US$1 billion. (35) Further, even though the DPRK has recently relinquished its nuclear weapons programme and has begun to receive substantial aid, state-sponsored trafficking is not likely to cease as the military regime in North Korea continues to teeter on the brink of collapse. Wortzel holds Beijing at least partially responsible for North Korea's illicit activities, because Beijing often defends Pyongyang at the United Nations and has vowed not to let the DPRK collapse. (36)

There have been accusations that not only does North Korea directly support the drug trade, it also engages in production. (37) The high availability of heroin near border areas points to North Korean involvement. However, the transit route from Afghanistan that goes through Russia's Far East also contributes to heroin availability. Nonetheless, high quantities suggest that there is a significant amount of direct trade from the DPRK. Some have gone so far as to estimate that North Korea is the third-largest supplier of heroin into China, behind Burma and Afghanistan. (38) Further, there is strong evidence that suggests that North Korean criminal syndicates are working very closely with Russian and Chinese groups that deal with the heroin trade. The Triads are also likely involved in this region, although they do not control it entirely because Russians have managed to secure a foothold in Chinese criminal organizations. (39) Regardless, due to increased North Korean production and an open transit route from Afghanistan to Russia's Far East, it is highly possible that a buyers' market will emerge in northeast China, with a greater supply and lower prices. (40) In addition, speculation has begun that as Japan is the most lucrative market for methamphetamine exports in Asia, Chinese criminal syndicates may be channelling domestically produced AST through North Korea into Japanese cities, and some methamphetamine being manufactured in North Korea can even now be viewed as having a Chinese source. (41)

One of the largest markets for North Korean narcotics is China, where narcotics are sold for as high as US$10,000 per kilogram or even US$15,000 per kilogram if the drugs are smuggled by sea, a highly risky operation. These narcotics are not only consumed by the Mainland, but also make their way down to Hong Kong and Macao. North Korea is also believed to utilize banks in Macao to launder drug profits. (42) Kim Young-Il, a North Korean defector to the South who was employed by the North Korean National Security Agency from 1983-1998, alleges that in late 1997, the DPRK central government ordered all collective farms to begin cultivation of 25 acres of land for the growing of opium poppies. However, he claims that Beijing became aware of these developments and deployed reporters and police to take pictures of the North Korean farms near the Chinese border in an effort to prevent cultivation. (43) Hwang furthers this accusation by stating that North Korea currently has anywhere from 4,200 to 7,000 hectares under poppy cultivation. (44) Asher also seems to be in agreement with this view, claiming that the narcotics situation in the DPRK is so serious that in March 2004, the Chinese vice minister of the Ministry of Public Security called a highly unusual "press conference" to announce a new initiative to dismantle North Korean drug rings in the Jilin border province, because the situation had become "out of control." (45) However, aside from occasional attempts to indirectly put pressure on Pyongyang, Beijing's response to cultivation in North Korea has mostly been weak and limited to actions such as aerial surveillance of the Greater Hinggan Mountains near the DPRK border. (46)

There are several examples in recent history of direct North Korean involvement in narcotics trafficking in China:

* In July 1995, an agent of the National Security and Intelligence Bureau of North Korea was arrested by Chinese police for attempting to smuggle 500 kilograms of heroin into the PRC.

* In 1998, a North Korean businessman with connections to the North Korean regime was arrested in Dandung City, China, for attempting to sell 900 kilograms of metharnphetamine.

* In December 1998, Chinese officials arrested a North Korean consulate employee and seized 9 kilograms of opium produced in North Korea.

* In May 2001, an ethnic Korean with Chinese citizenship was arrested for attempting to smuggle 30 kilograms of North Korean metharnphetamine into South Korea.

* In April 2001, Taiwanese police made two seizures of metharnphetamine, totalling 107.6 kilograms and worth US$3 million, originating from North Korea.

* In December 2000, Taiwanese authorities seized 134 kilograms of heroin originating from North Korea. (47)

Also noteworthy is that although there have been numerous cases of North Korean narcotics trafficking in China, there have been considerably more in Russia, especially in Russia's Far East. Some of these narcotics also make their way into China. (48)

Much research and attention has been focused on DPRK trafficking into China via direct orders from Pyongyang but little focus has been placed upon the 100,000 to 200,000 North Korean refugees in the border area. (49) This vast population provides excellent networking opportunities for both the Kim Jong-Il regime as well as Chinese criminal enterprises such as the Triads. Poverty and lack of education help to provide social conditions that are conducive to drug abuse and a common language and ethnicity would serve as a distinct advantage for North Korean narcotics traffickers and their operating partners. This current situation has the potential to cause a serious problem for Beijing's anti-narcotics efforts. A lack of infrastructure makes it very difficult to identify and target routes or hot spots as Chinese authorities are not readily able to monitor phone calls, intercept communications, or utilize the benefits of modem technological innovation.

Lastly, the DPRK's alleged counterfeit US dollar programme poses a challenge to Beijing, as some have claimed that these "supernotes" have begun to flood Asian and European markets. (50) If accurate, this could spell trouble for the PRC, because Chinese narcotics could be purchased with false currency, thus fuelling Sino-North Korean cooperation in drug trafficking while simultaneously devaluing the US dollar. Currency and trade issues have recently become a sore spot in Sino-US relations. The United States has accused the PRC of intentionally devaluing its currency in order to maintain the current trade imbalance that is immensely in favour of China and to undercut US domestic products with inexpensive Chinese imports. A situation such as the one outlined above would undoubtedly strain Sino-US ties, something that would be harmful for both parties as their economies are becoming increasingly intertwined because of foreign investment.

4. Xinjiang and Central Asia: China's Future Hot Spot and Enforcement Nightmare

Some believe that Chinese narcotics threats have shifted away from solely the Golden Triangle to a more multifaceted threat, with opium and heroin now also filtering in through Eurasia, specifically from Afghanistan, which produces the vast majority (around 90 percent) of the world's opium, with over 3,600 annual tons. (51) However, other well-known researchers, such as Chin and Zhang, feel that the Golden Crescent is not a threat to China because most of the narcotics produced in the region are bound for Europe, North America and Russia, and the Sino-Afghan border is only 92 kilometres long and is 5000 metres (about 12,000 to 15,000 feet) above sea level. (52) Chinese authorities validate these claims by stating that less than 5 percent of China's narcotics come from the Golden Crescent. (53) Although Chin and Zhang's observations are not without merit, the presently low levels of heroin entering Xinjiang are largely the result of a lack of infrastructure in Xinjiang and northeast Pakistan. Once the Gwadar port is complete, the road and rail links are developed, and air travel increases, regional traffickers, many of whom reside in Pakistan and are heavily involved in trafficking Afghan opiates, will be keen to tap the market of Xinjiang's 20 million mostly disaffected inhabitants. Further, as economic ties deepen between China and Pakistan, a result of Beijing's determination to contain India within the Subcontinent, Pakistan will see a greater influx of economic migrants that will further facilitate narcotics trafficking through Pakistan into Xinjiang.

Beijing has launched the Western Development Strategy, which focuses primarily on physical infrastructure such as railways and highways. (54) Seven national highways now pass through Xinjiang's capital, Urumqi, and link the province with the rest of China. Xinjiang also now has 11 airports, connecting Urumqi with Almaty, Tashkent, Moscow and Islamabad. In addition, Beijing has sought to greatly increase Xinjiang's telecommunications facilities and the whole province now has a mobile phone service. These efforts are at least partially being made because Xinjiang's trade with Central Asia has begun to increase in recent years and Beijing views Xinjiang as China's "frontline opening to the West." (55) Although Beijing's aim to bring Xinjiang's level of development up to the same standard as the more prosperous East is indeed wise, improved transportation and communication infrastructure will have the unintended consequence of enhancing the operational capacities of narcotics traffickers, especially as Beijing is actively pushing for the impoverished province to strengthen its legitimate trade links with its Central Asian neighbours.

Salaries in urban Xinjiang are on the rise and the consumption of durable consumer goods such as televisions and washing machines is increasing rapidly. Xinjiang is also rich in oil and natural gas, and Beijing has begun to increase its exploration. In major oil-producing cities many jobs have been created and Xinjiang's regional economic structure has improved by over one billion yuan. (56) It is noteworthy that these developments are occurring while the percentage of heroin addicts in Xinjiang is double the national average and Chinese traffickers have begun to export precursor chemicals to Afghanistan and Central Asia. (57) As salaries continue to rise moderately while the majority of the population remains marginalized and subject to discriminatory policies by Beijing, heroin consumption will also increase. A segment of the population will have slightly more extra cash than they are used to, and some will use it to purchase cheap Afghan heroin.

Uyghurs in the province of Xinjiang have been hit especially hard, with many addicts being Muslim males as young as fifteen. Heroin is the main drug of choice and the trend has gone from smoking to injection, creating a major HIV crisis in the region, while local corruption is largely to blame for both Beijing's and Xinjiang's inability to combat it (58) Transporting Afghan opiates into Xinjiang is less risky than attempting to move them through India and Pakistan. Ethnic links between many Xinjiang residents and other Central Asian states further facilitates trafficking through China's remote northwest. In addition, not only is Xinjiang a consumption area, it also serves as a transit point for Afghan narcotics destined for Russia and Europe.

Air travel out of Xinjiang has increased significantly in recent years, with Beijing planning to build seven new airports. Although 90 percent of current transit traffic in the region is via railway or road and the small amount of air traffic makes monitoring relatively easy, it could nonetheless pose a significant difficulty in the future, especially if PRC economic growth continues and carries out its declared goal of bringing its western regions up to the same level of development as its eastern areas. Regional trade between China, Pakistan and the Central Asian republics is also on the rise, as Beijing looks for new partners and Central Asia is keen to become less reliant on Russia. (59)

Despite the fact that Afghan opium cannot be transferred to Xinjiang in multi-ton shipments like it can be over the Pakistan-Iran border, it can still be transferred in large quantities through small load transfers by means of couriers. This should be of concern to Beijing because small loads are more difficult to detect and cheap couriers are in ample supply in Central Asia. Demand in Xinjiang will also continue to increase as the region remains poor, uneducated, without means of legitimate upward mobility, and the subject of discrimination, as Chinese authorities target them under the banner of the War on Terror. (60) Adding to the dilemma is the fact that some Islamic Uyghur groups have become radical in response to these undesirable social and economic conditions and have begun to receive funding from overseas, thus potentially enhancing their abilities to traffic narcotics. This development can already be seen in Afghanistan and Central Asia. If these conditions persist unabated, Xinjiang could become a battleground between competing syndicates trafficking narcotics from Afghanistan and those distributing from eastern regions of China. (61)

Aside from the major routes already mentioned, there are several smaller-scale routes that do contribute slightly to narcotics trafficking in the region. For example, even though not much trafficking occurs along the 76-kilometre Sino-Afghan border because the conditions on the frontier are daunting, at an altitude of 4,927 meters, it could become a trouble spot in the future, with smaller quantities being transferred at a higher frequency. Opium and heroin also find their way into Xinjiang via Pakistan, as Pakistan's tribal areas are located on a porous, largely unregulated border with Afghanistan. Islamabad does not exert full control over the region and people and goods move freely between the two countries. Problem areas include Baluchistan, North Waziristan and South Waziristan. In addition, some narcotics from Pakistan are trafficked to China through Pakistan's north via the Karakoram Highway. However, most is used for local consumption in northern Pakistan and southern Xinjiang, and thus is not available for further transport within China or internationally. (62)

One of China's most pressing concerns regarding Xinjiang is the current state of Kyrgyzstan's Drug Control Agency (DCA). In response to the March 2005 political upheavals, the influence that narcotics traffickers are able to extend on the political system has increased and reached unprecedented levels. A number of contract killings of high-level public figures have been connected to the narcotics trade within Kyrgyzstan. The DCA is completely funded by the US, is experiencing significant difficulties, and there are fears that the agency is not going to be able to continue to function. For one, it is inefficient and is in desperate need of organizational restructuring. Second, geopolitics and domestic power struggles, combined with deeply ingrained corruption, greatly constrain the agency's capabilities in Kyrgyzstan. Some believe that only 3 percent of drugs smuggled through Kyrgyzstan are seized. (63) There are also concerns about the other drug enforcement agencies in the region. Swanstrom alleges that increased seizures in Central Asia are more of a reflection of increased trafficking rather than an indication of improved enforcement by regional law enforcement agencies. Further, recent research has demonstrated that Southeast Asian and Chinese smugglers are using routes in Central Asia to transport their product to the European markets, while profits from Chinese markets have strengthened the operational capacities of cartels in Central Asia. Lastly, Swanstrom cautions that rival Chinese and Southeast Asian groups may cause armed conflict and further destabilize the Central Asian republics. (64)

Beijing alleges that according to historical research, all Chinese dynasties have stationed troops in frontier areas such as Xinjiang, in order to develop border areas and consolidate frontier defence. (65) The PLA presence in Xinjiang could be utilized more efficiently if it increased its involvement in counternarcotics operations in order to account for a lacking police force. Further, any PLA counternarcotics unit would not be short of funds, as Beijing has prioritized defence and unconventional units in particular. This would allow China to proactively head off a crisis in Xinjiang and would also provide an ideal opportunity for China to further broaden its defence ties with its Central and South Asian neighbours. In addition, by effectively stemming or eliminating narcotics trafficking into Xinjiang altogether, the PLA would boost its image amongst NATO countries. It is common knowledge that many profits from Afghan heroin sales fund the Taliban and various other anti-Coalition forces in both Afghanistan and Pakistan.

5. Corruption--the PRC's Achilles Heel

Despite sincere efforts by many Chinese officials, narcotics trafficking remains a major issue. Corruption within China and in the governments of China's neighbours poses a serious hurdle to combating the drug trade in the region. An increasing number of mid-level officials are being implicated in illicit businesses such as drug trafficking. (66) The US State Department believes that members of the Chinese Communist Party (CPP) "must be protecting drug producers and traffickers," because the industry continues to function at such a high level. (67) Another criticism given by the State Department is that China's anti-corruption campaign has focused more on illegal smuggling of consumer goods, misappropriation of funds, embezzlement, and abuse of official power. (68) However, China's entry into the World Trade Organization (WTO) may help to curtail smuggling because a reduction of import tariffs will likely reduce "pay to pass" checkpoint systems. (69)

Local officials have been cited by the Chinese government as being of particular concern. Given China's booming economy, even a relatively lowlevel official can amass an ill-gotten fortune of tens of millions of yuan. One CCP standing secretary was arrested after having acquired 32 million yuan while his colleague, the anti-corruption chief, had collected 30 million yuan in bribes. However, despite severe punishments in high-profile cases, official enforcement data indicate that the vast majority of corrupt officials receive warnings and do not face charges. The odds of a corrupt official going to jail are at most 3 out of 100, thus making corruption a high-return, low-risk activity. (70) Further, under China's one-party system, local CCP secretaries control the local media, legislatures and courts, allowing them to effectively choke off information to Beijing. (71)

Since 1990, China has begun to see what is commonly referred to as "maiguan maiguan" occur at the local level. Maiguan maiguan involves both the buying and selling of key local government positions as well as active collusion with local officials to protect one another from prosecution. In some extreme cases, maiguan maiguan has turned entire jurisdictions into mafia states. One such city, Fuyang in Anhui province, has dismissed successive police chiefs due to corruption. (72) In response to these types of occurrences, China has strengthened anti-graft laws and has explicitly listed prohibited activities. Further, a supervision and internal audit office is present in all public security organs above county level. (73) However, officers in these departments, much like other Chinese law enforcement personnel, likely receive salaries that are woefully inadequate and remain susceptible to corruption. Also, if illicit activities such as smuggling remain confined to a few select counties and internal audit personnel receive protection from local CCP officials, these units can easily be rendered useless. Further, as is the case with law enforcement agencies across the world, there exists serious doubt as to whether police officers will investigate their own colleagues with the tenacity expected by the civilian populace and central government.

Beijing has implemented some additional measures, such as the rotation of provincial anti-corruption chiefs, appointing central government officials to head provincial anti-graft commissions, making anti-corruption chiefs in ministries, agencies, and key state-owned industries report to the Central Discipline and Inspection Commission (CDIC), and sending inspection teams to monitor party bosses. However, these actions have only had a limited impact, as the CCP fears that a more comprehensive approach would threaten its supremacy. As such, the CCP has refused to reduce the role of the state in the economy, increase judicial independence, or allow more free media, all of which are essential tools to root out systematic corruption. (74)

Both the PLA and the People's Armed Police (PAP) have been involved in a wide range of smuggling operations, including narcotics, arms and oil, especially after they were ordered out of commercial activity in 1998. (75) In total, 2,937 firms belonging to either the PLA or the PAP were transferred to local governments and 3,928 enterprises were closed. The PAP has a particularly troublesome reputation in Guangdong for smuggling, as does the PLA, although the latter's role is not as extensive. Other problem areas for PLA/PAP corruption are Guangzhou and Fujian. Contraband ranging from guns to automobiles have entered south China illegally, often with direct assistance from the PLA or the PAP, yet few public indictments have been brought against those involved. Nonetheless, after several pay increases combined with the downsizing and professionalization drive undertaken by the PLA, corruption has been transformed from a major issue in the 1980s and 1990s to a more manageable discipline issue at present. (76) However, corruption within the PAP remains a problem, given that an average Chinese police officer earns roughly US$100-150 per month despite working excessively long hours. Further, Chinese police are not subject to oversight by prosecutors' offices and moves to change this have been resisted by top law enforcement officials. (77) As such, given the PLA's relatively cleaner track record, higher quality of personnel, funding priority, and its oversight by the Central Military Commission (CMC), the PLA should be the force that is utilized in Xinjiang, as opposed to the less professional, poorly trained PAP, a body that had very limited influence prior to the Jiang Zemin era and whose role in Chinese society is not clearly defined.

6. Chinese Reponses: Past, Present and Future

Under Mao, China was viewed as a recovered addict nation after the Opium Wars, because Mao imposed strict penalties for the distribution and use of narcotics. Drug abuse was regarded as a Western problem and this greatly hindered China's efforts in effectively tackling the domestic drug problem that, despite claims from Mao, remained a serious issue. (78) Also, in the 1980s, Deng's policy of Reform and Opening had the unintended consequence of causing the narcotics trade to re-emerge as one of the gravest threats to both the internal stability and foreign relations of China. (79) China does indeed view drug trafficking as a major threat to national security, the economy, as well as national and regional stability, and funding for counternarcotics efforts has risen from US$1 million per year in the mid-1990s to US$17.5 million in 2003. Currently, 9 percent of the police force in China is focused on the drug trade, thus putting significant strain on government resources. Regardless, it appears that Beijing has little choice but to crack down, as the narcotics business in China was reported to be worth at least US$24 billion in 2005. (80)

China's legal and financial systems have not kept up with China's "rapid internationalization" and Chinese authorities are not able to effectively track the dramatic increase in foreign currency movement between China and the rest of the world. (81) Not surprisingly, money laundering, bank fraud and other types of financial crimes have increased in frequency along with China's economic growth. Not only are law enforcement agencies unable to keep pace with the growth, they also lack the training and equipment to prevent, investigate and effectively prosecute drug-related financial crimes. The problem has even been raised by Zhou Xiaochuan, governor of the People's Bank of China, who claims that much stronger steps need to be taken against money laundering. (82) In response to some of these criticisms, the PRC has taken moderate steps to improve its anti-money laundering capabilities. For example, the State Administration for Foreign Exchange (SAFE) and the Ministry of Public Security (MPS) issued a joint circular in 2001 that called upon local departments of both agencies to engage in closer cooperation when monitoring foreign exchange transactions. However, a major inhibitor regarding China's anti-money-laundering efforts is the fact that it is not a member of the Asia/Pacific Group on Money Laundering (APG) due to a dispute over the status of Taiwan in the organization. (83)

China has developed a six-tier strategy for combating drug abuse and narcotics trafficking within its borders:

* constantly strengthen drug control legislation;

* crack down on drug-related crimes;

* exercise stricter controls over precursor chemicals;

* treatment and rehabilitation (required under Chinese law);

* raise the consciousness of the entire populace against drugs; and

* develop international cooperation in drug control. (84)

In order to implement this strategy, China created the National Narcotics Control Commission (NNCC) in 1990, which falls under the control of the State Council and comprises 26 governmental and mass organizations. It is headed by a commissioner who is assisted by four vice commissioners, specifically the vice minister of Public Security, the vice minister of Publicity, the vice minister of Health, and the vice administrator of General Administration of Customs. Further, the vice minister of Public Security also serves as the secretary general of the NNCC and the organization is charged with providing a unified, blanket leadership for narcotics control efforts within China, coordinating investigative efforts, formulating effective policies, and is held responsible for international drug control cooperation. Other responsibilities of the NNCC include policy and strategy development and the drafting of guidelines for action to provincial and local organizations. Further, the NNCC is expected to carry out all of its activities in accordance with State Council resolutions while supervising the development of the National Narcotics Plan and overseeing the drafting of the Narcotics Law. (85)

The National Narcotics Bureau of the Ministry of Public Security is the operational agency of the NNCC. Because of this, the bureau is also called the Office of NNCC. This office has eight divisions: administrative office; preventive education; narcotic drugs-related criminal investigation; drug demand reduction; precursor chemical control; international cooperation; and psychotropic substances related criminal investigative division. (86) The Ministry of Public Security has been granted the authority to assume overall jurisdiction for China's narcotics control under the direct leadership of the State Council. (87)

China has made a substantial effort to not only decrease drug trafficking and consumption within China, but also to strengthen cooperation with its Southeast and East Asian neighbours. For example, by 2004, specialized counternarcotics police teams had been established in 707 counties and 327 cities in 31 provinces, autonomous regions and municipalities. They are reported to have a generous budget and their personnel numbered 17,000 at last estimate. (88) However, given the immense size of this force (nearly twice the size of America's Drug Enforcement Administration, or DEA), the majority of these counternarcotics officers undoubtedly remain underpaid and some of those posted in corruption-ridden areas will instead use the opportunity to increase their own personal income and assets, much to the detriment of Beijing's aims.

The NNCC has executed several crackdowns in problem areas such as Yunnan, Guizhou, Sichuan, Guangdong, Gansu and Guangxi. (89) Further, seemingly in an attempt to ensure that the efforts of these periodic crackdowns do not go to waste, in October 2006, China hosted the Second International Congress of ASEAN and China on Cooperative Operations in Response to Dangerous Drugs, during which several major agreements were made. Second, in November of that year China attended the Second ASEAN and China, Japan, and the Republic of Korea Ministerial Meeting on Transnational Crime and the First China-ASEAN Ministerial Meeting on Transnational Crime. (90) In addition, in September 2004 China hosted the ASEAN Regional Forum Workshop on Drug-Substitute Alternative Development in Kunming, Yunnan. The PRC held this workshop while simultaneously conducting bilateral meetings with the Burmese regarding intelligence and law enforcement exchange, joint training and crop substitution programmes. (91)

Although conducting consultations while taking steps to make practical improvements on the ground is indeed the correct framework, this tactic has not been implemented in Xinjiang. Beijing's priorities regarding Afghanistan were made clear by Chinese Foreign Minister Li Zhaoxing in January 2006 at a conference in London. He stated that in the realm of counterterrorism, Afghanistan and China have exchanged police liaison officers to enhance information exchange, and further police and military cooperation is planned. However, Zhaoxing only played lip service to the counternarcotics issue by broadly stating that China supports Afghanistan in its fight against narcotics and that Beijing stands behind the SCO's attempts to offer alternative crops to Afghan farmers. (92) Judging from Zhaoxing's statements, it is apparent that Beijing has narrowly focused its attention on the East Turkestan Islamic Movement (ETIM) at the expense of heroin trafficking and the associated syndicates that will accompany it, both of which pose an equally grave threat to stability in Xinjiang. China should expand its security ties with Afghanistan and place an equal emphasis on both counterterrorism and counternarcotics, especially given the close interaction between the two in the region. To treat them as two mutually exclusive categories is an artificial differentiation and will result in a failure to effectively combat either problem in the future. This is something that Beijing simply cannot risk in Xinjiang.

China has begun to engage the international community in a much more effective manner. China has over 30 mutual assistance treaties with 24 countries, including Russia, Mexico, Pakistan, India and the United States, that cover both civil and criminal matters. (93) In 2005, several cocinetrafficking laboratories were dismantled in Hong Kong as a result of joint operations. Further, a 2006 Chinese-DEA operation made a record seizure of 135 kilograms of cocaine off the coast of Hong Kong while 10 tons of Chinese pseudoephedrine tablets were seized in Los Angeles in 2004. In addition, cooperative efforts in 2003 lead to the closure of 10 methamphetamine laboratories in Taiwan. Although this was a positive event, it did raise fears that AST production in China is spreading from Guangdong and Fujian. (94) The PRC also now shares drug-smuggling information with the United States on a case-by-case basis, and in 1997 a US-PRC Memorandum of Understanding on Law Enforcement Cooperation was signed that allows both sides to provide assistance on narcodcs investigations and prosecutions. The United States and China also signed the Mutual Legal Assistance Agreement in mid-2000. Currently, PRC and US counternarcotics officials meet on a regular basis to discuss matters of mutual interest. (95)

In regards to nations aside from the United States, China is a party to the 1988 UN Drug Convention and actively monitors the 22 precursor chemicals identified in the mandate. In addition, the PRC utilizes asset forfeiture for trafficking offences and it is not uncommon for death sentences to be imposed upon heroin traffickers. (96) Further, the PRC cooperates with several Southeast Asian states and supports crop substitution initiatives for farmersin Burma and Laos as well as demand reduction efforts in Yunnan. China signed a joint communique with ASEAN in 2000 with the aim of a drug-free ASEAN by 2015. China signed another declaration in 2002 with ASEAN regarding cooperation in non-traditional security issues with a focus on narcotics trafficking. These agreements have received some of the credit for the 2004 closure of 9 heroin-processing plants within Burma, netting a total of 275 kilograms of semi-processed heroin, 12 kilograms of synthetic drugs, 28 tons of poppy seeds, and 47 tons of precursor chemicals. (97) Lastly, China is a member of the SCO with Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan; Mongolia and Iran have observer status. However, counternarcotics efforts within this body have been highly limited. (98)

Although a comprehensive counternarcotics strategy is needed--one that includes domestic coordination, bilateral partnerships, and regional bodies such as ASEAN--the SCO is an organization that must be utilized in future counternarcotics efforts. The organization has strong economic foundations and focuses on trade; narcotics trafficking fits its mandate, as it harms economic growth through the development of parallel economies, and it also complicates trade. The SCO already has an established infrastructure, meets regularly, and includes all of the Central Asian republics (except Turkmenistan) and has given Iran observer status. These meetings can serve as a think-tank that encourages the exchange of ideas between security personnel, analysts and other government officials on how to more effectively combat this non-traditional security challenge and to improve regional coordination. This would also allow China to demonstrate that it is a responsible actor that is interested in playing a constructive yet non-intrusive role in the affairs of its neighbours for the benefit of regional stability.

7. Conclusions

Narcotics trafficking in China is a problem, yet the issue is not receiving enough attention from the Chinese government, the media, policy institutions, the United Nations or foreign governments. Heroin, opium and AST consumption and distribution within China is not solely a Chinese issue, but an international one. As China's economy and global reach continues to expand, so too will the ability of Chinese syndicates to move their illicit products onto global markets. Unlike some other major drug-producing nations whose activities appear to be slowing because of well-formulated strategies combined with positive economic growth, the Chinese drug trade is speeding up. Unstable near neighbours, growing transportation and communication infrastructure, widening income disparity, and an increased interest in legitimate Chinese markets are all contributing factors to this issue, and none of them show signs of fading. Beijing is facing a major challenge that could inhibit the country's efforts to recover from the Century of Humiliation, and which can only be swept under the rug for a limited amount of time before it emerges and poses a serious security threat to nations across the globe. The drug problem will not only cause further internal unrest within China, but will also undoubtedly greatly harm China's relations with its immediate neighbours as well as other major world powers.

Despite several clear warning signs, Beijing remains over-focused on its borders with the Southeast Asian nations, at the expense of Xinjiang. Although Xinjiang has not yet seen the type of large-scale trafficking that has occurred elsewhere in China, recent geopolitical developments indicate that this will change. The Gwadar port and the extensive road project that will accompany it will bring about increased development in Xinjiang by providing the province with access to the Arabian Sea. Nonetheless, it could also have the unintended consequence of flooding Xinjiang with Afghan opiates, 25 percent of which transit Pakistan. As long as Xinjiang remains underdeveloped, with low social indicators, the demand for opiates will remain, especially since rampant overproduction in Afghanistan has kept prices down. Further, as the Taliban insurgency rages on in select areas of Afghanistan and Pakistan and accusations of direct Pakistani state involvement in trafficking activities continue to increase, Xinjiang could become a reliable source of revenue generation. Xinjiang is a desirable trafficking destination, given its geographic proximity to major areas of production and the fact that transport is much less risky, especially since counternarcotics measures taken by China, Afghanistan, Pakistan and the Central Asian republics remain inadequate.

Beijing must bolster the counternarcotics capabilities of the PLA units stationed in Xinjiang while simultaneously taking the necessary steps to root out corruption in the police force. This will inevitably involve increasing the salaries of police officers, scaling back the powers of local CCP officials, increasing judicial independence, and allowing more press freedom, all of which would be new but vital developments in China. Further, by successfully combating heroin trafficking in Xinjiang, the PLA could improve its image within the province and also help to allay fears of the "China Threat" within NATO. Shutting off future routes to Xinjiang would equate to denying a substantial source of funding for various regional insurgent groups. The PLA certainly has the manpower, with over two million soldiers, and the army has benefited tremendously from decades of double-digit economic growth. Any strategy that does not recognize the PLA's utility in counternarcotics operations in Xinjiang is unlikely to be successful.

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