Investigators for a U.S. House committee released a report on Tuesday detailing what they describe as new evidence the Chinese government is continuing to “directly” subsidize “the manufacturing and export of illicit fentanyl.”
According to the report, Chinese officials encourage production of precursor chemicals by giving “monetary grants and awards to companies openly trafficking illicit fentanyl materials.”
Specifically, researchers found companies making fentanyl precursors and analogues could apply for state tax rebates and other financial benefits after exporting the product.
Street fentanyl has driven a devastating surge in fatal overdoses, killing tens of thousands of people in the U.S every year.
The Biden administration and drug policy experts say China is the primary source of precursor chemicals used by Mexican drug gangs to manufacture the powerful street opioid.
Last November, U.S. officials said their counterparts in China promised to crack down on the illicit fentanyl industry.
“We’re taking action to significantly reduce the flow of precursor chemicals and pill presses from China to the Western hemisphere,” President Joe Biden said, following a summit with Chinese President Xi Jinping in California.
“It’s going to save lives and I appreciate President Xi’s commitment on this issue.”
But five months after that announcement, a report produced by a bipartisan team with the U.S. House Select Committee on the Chinese Communist Party, found the tax rebates and other incentives appear to still be in place.
China’s role in fentanyl production previously documented
Many of the findings were known previously among drug policy experts. They appear to confirm reports that the Chinese government bureaucracy is aiding the production and export of fentanyl-related substances.
In a 2019 book, Fentanyl, Inc., journalist Ben Westhoff wrote about “a series of tax breaks, subsidies and other grants” that benefit Chinese companies who produce fentanyl analogues.
An NPR investigation in 2020 found a web of Chinese companies whose employees were openly marketing fentanyl precursors and selling them to clients in Mexico and the United States.
However, despite U.S. diplomatic efforts to stem the production of precursors, China has done very little to enforce international and domestic laws banning fentanyl production.
According to the House report released Tuesday, Chinese officials appear to have taken steps to conceal financial incentives linked to fentanyl, but failed to end them.
One of the investigators told reporters it was clear companies were contributing directly to the overdose crisis by leveraging benefits available through China’s complex bureaucracy.
“The fact that these [precursor chemicals] are subsidized solely for export is what allows them to go through so cheaply,” said the staffer, who spoke on background in order to outline details of the report ahead of a committee hearing today.
Investigators say they found evidence that many of the subsidized companies are marketing their products directly to illicit buyers in Mexico, using crypto-currencies to help conceal transactions.
“Rather than investigating drug traffickers, [Chinese] security services have not cooperated with U.S. law enforcement, and have even notified targets of U.S. investigations when they received requests for assistance,” said the report.
NPR requested comment from the White House late Monday, but received no reply before press time.
The House report points to a number of possible motives for the Chinese government allegedly aiding the production of illicit fentanyl.
“The fentanyl crisis has helped [Chinese Communist Party-linked] organized criminal groups become the world’s premier money launderers, enriched the [Chinese] chemical industry, and has had a devastating impact on Americans,” investigators concluded.
Tuesday’s committee hearing will include testimony about China’s role in illicit fentanyl trafficking from former U.S. Attorney General William Barr, Ray Donovan, a former Drug Enforcement Administration Official, and David Luckey, a drug policy expert with the RAND Corporation.
With more than 110,000 drug overdose deaths every year in the U.S., fentanyl has become a major flashpoint in the 2024 presidential campaign. Staff-members involved in producing this latest report described the investigation as a bi-partisan effort.
Transcript:
A MARTÍNEZ, HOST:
A new report released this morning found that China’s government is subsidizing production of the deadly chemicals used to make fentanyl. The powerful street opioid is killing thousands – actually tens of thousands of Americans every year. U.S. officials have pressured China to stop fentanyl production for years, but investigators with a House committee say Chinese companies involved in the fentanyl trade are getting tax breaks and other incentives. NPR addiction correspondent Brian Mann joins us. Brian, so what does this report say?
BRIAN MANN, BYLINE: Well, A, we’ve known that chemical companies in China are manufacturing these precursor chemicals that are then sold to Mexican cartels. The drug gangs then cook that fentanyl that winds up in the U.S. It’s often formed into fake prescription pills. Fentanyl is killing nearly 200 Americans every single day. And what this investigation found – here’s what’s new – is that after these Chinese companies export those deadly chemicals, they’re then applying for and apparently receiving government tax rebates, grants and other incentives.
One of the investigators, speaking with reporters on background, said those subsidies from the Chinese government to these criminal companies are helping fuel America’s deadly overdose crisis.
MARTÍNEZ: Is there, though, evidence the Chinese government is doing this on purpose, deliberately?
MANN: Yeah, the motives are unclear. A bipartisan team of investigators for the House Select Committee on the Chinese Communist Party found that by supporting these companies that are clearly involved in this criminal enterprise, the Chinese government has boosted its chemical manufacturing industry. These investigators also allege that criminal gangs with links to the Chinese Communist Party have gained a lot of power. They’ve emerged as top international money launderers because of the fentanyl business. And this report also suggests China may hope to weaken the U.S. with fentanyl, which is now a leading cause of death for Americans under the age of 40.
MARTÍNEZ: Hey, Brian, I remember last October, President Biden met with China’s President Xi Jinping. And Biden said back then that Chinese officials promised to help curb fentanyl chemical exports. Any sign of progress there?
MANN: Yeah, no progress. The House investigators found, in fact, that evidence shows China took steps to hide these financial subsidies for companies making fentanyl chemicals. They say those incentives appear to still be in place as of this month. They also say there’s no sign China’s central government is using its immense power to crack down on the fentanyl industry. On the contrary, investigators say China warned chemical companies about U.S. drug investigations. NPR has reached out to the White House for a comment about this report, and so far, we haven’t heard back.
MARTÍNEZ: OK. Now, does this report offer any new ideas for stopping these Chinese chemicals that make fentanyl?
MANN: So this House committee is holding a hearing today to talk about new ways to pressure the Chinese government, but they acknowledged this won’t be easy. Tensions between the U.S. and China are already high because of Taiwan and trade issues. This report also points out that many of these Chinese chemical companies involved in the fentanyl trade are big players in other legitimate industries, with customers in the U.S. and around the world. There’s also now this complicated system of money laundering involving cryptocurrencies that makes it really hard to track the money involved in these deals.
MARTÍNEZ: One more thing quickly, Brian – what’s happening with fentanyl across the U.S? Remind us where we’re at with this crisis.
MANN: Well, it’s still grim, A. We’re seeing around 110,000 total drug deaths a year. In some cities and rural areas, overdose rates are actually still rising. What’s clear is the overwhelming majority of that is being driven by this fentanyl sourced from China.
MARTÍNEZ: All right. That’s NPR addiction correspondent Brian Mann. Brian, thank you very much.
MANN: Thank you.
