Report: China continues to subsidize deadly fentanyl exports

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.

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