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Drug and Chemical Control
Summary
The People’s Republic of China is a major drug transit country to regional drug consumers in neighboring parts of Asia as well as for international drug markets (though not the U.S.). China continues to have a domestic heroin consumption problem along with an upsurge in the consumption of synthetic drugs such as Ecstasy and crystal methamphetamine, known as “ice.” Chinese authorities view drug trafficking and abuse as a major threat to China’s national security, its economy, and its national and regional stability, but corruption in far-flung drug producing and drug transit regions of China limits what dedicated enforcement officials can accomplish. Authorities continue to take steps to integrate China into regional and global counternarcotics efforts. China is a party to the 1988 UN Drug Convention.
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Money Laundering and Financial Crimes
Over the past five years, the Government of the People’s Republic of China has made significant progress in developing anti-money laundering and counter-terrorist financing measures including through legislative reform, strengthening enforcement mechanisms, and international cooperation efforts. However, money laundering remains a serious concern as China restructures its economy and develops its financial system. Narcotics trafficking, smuggling, trafficking in persons, counterfeiting of trade goods, fraud, tax evasion, and other financial crimes are major sources of laundered funds. Most money laundering cases currently under investigation involve funds obtained from corruption and bribery. Chinese officials have noted that most acts of corruption in China are closely related to economic activities and accompanied by illegal money transfers. Proceeds of tax evasion, recycled through offshore companies, often return to China disguised as foreign investment and, as such, receive tax benefits. Underground banking and trade-based money laundering are an increasing concern. According to the International Monetary Fund, money laundering in China may total as much as U.S. $24 billion per year and officials with the People’s Bank of China reported a total of 1,239 cases involving illicit money flows involving 362.6 billion Chinese yuan renminbi (RMB) (approximately U.S. $45.3 billion) in 2006.
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