China - iIllicit cigarette operations ..

July 1, 2009 - Today, China's fake cigarettes—knockoff Marlboros, Newports, and Benson & Hedges—are flooding markets around the globe. They fuel a violent, multibillion-dollar black market and are even more hazardous to smokers than the real thing, yet the industry is little-known.

By one tally, some 200 illicit cigarette operations are hidden in Yunxiao, a southwestern Fujian county about twice the area of New York City. Over the last 10 years, production of counterfeit cigarettes has soared in China, jumping eightfold since 1997 to an unprecedented 400 billion cigarettes a year—enough to supply every U.S. smoker with 460 packs a year. Once famed for its bright yellow loquat fruit, Yunxiao is the trade's heartland, the source of half of China's counterfeit production.

Cigarette counterfeiting is immensely lucrative, with profits easily rivaling those of the narcotics trade. While a pack of fake Marlboros costs 20 cents to make in China, it can fetch up to 20 times that amount in the United States. And though a drug trafficker might land a life sentence if caught, a cigarette counterfeiter usually receives a comparative slap on the wrist—a handful of years in jail or possibly a fine.

In 2001, Chinese manufacturers were producing eight different varieties of counterfeit Marlboros. As of last year, though, Chinese counterfeiters were manufacturing separate versions of Marlboro tailored for some 60 countries—down to the specific details of tax stamps and regional health warnings. As many as 99 percent of counterfeit cigarettes in the United States come from China.

Every year, China's smokers consume 2.2 trillion cigarettes. The number of counterfeits flooding the domestic market is similarly off the charts. In China, all legal manufacture and distribution of cigarettes is state-owned and state-controlled. With cigarette sales accounting for nearly 8 percent of China's budget in 2007, the state has a strong motive to keep its supply counterfeit-free. (Officials are zealous about protecting the market, too: Until this April, officials in the central Chinese province of Hubei were required to smoke a collective 230,000 packs of regional brands a year.)

For the U.S. consumers, inhaling the knockoff cigarettes may do even more damage than their genuine counterparts. Lab tests show that Chinese counterfeits emit higher levels of dangerous chemicals than brand-name cigarettes: 80 percent more nicotine and 130 percent more carbon monoxide, and they contain impurities that include insect eggs and human feces. "The feedback from Russian customers is that they've gotten used to the fake flavor, and now they don't want the real ones anymore."

Reference: China's Marlboro Country The strange, underground world of counterfeit cigarettes. by Te-Ping Chen, Slate, 6/29/2009.

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