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Drug and Chemical Control
Summary
The People’s Republic of China (PRC) is a major factor in the regional drug market, serving as a transit country and an important producer/exporter of Amphetamine Type Stimulants (ATS). The PRC continues to have a domestic heroin problem along with an upsurge in the consumption of synthetic drugs such as Ecstasy (MDMA) and crystal methamphetamine, known locally as "ice". PRC authorities view drug trafficking and abuse as a major threat to national security, the economy and national and regional stability, but corruption in far-flung drug producing and drug transit regions of the PRC limit what dedicated enforcement officials can accomplish. Authorities continue to take steps to integrate the PRC into regional and global counternarcotics efforts. The PRC is a party to the 1988 UN Drug Convention.
Cooperation with United States counternarcotics officials has steadily improved over the past year. This was highlighted by a joint operation involving the DEA and several PRC law enforcement agencies in October 2004, which led to the world’s largest seizure of Mandrax, totaling 18 metric tons. In 2004, the Chinese Government also continued to provide U.S. counternarcotics officials with samples of drugs seized on a case-by-case basis.
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Money Laundering and Financial Crimes
Money laundering remains a major concern as the People's Republic of China (PRC) restructures its economy. A more sophisticated and globally connected financial system in one of the world's fastest growing economies will offer significantly more opportunities for money laundering activity. Most money laundering cases now under investigation involve funds obtained from corruption and bribery. Narcotics trafficking, smuggling, alien smuggling, counterfeiting, and fraud and other financial crimes remain major sources of laundered funds. Proceeds of tax evasion, recycled through offshore companies, often return to the PRC disguised as foreign investment, and as such, receive tax benefits. Speculation on a possible currency revaluation has also been fueling illicit capital flows into China throughout 2004. Hong Kong-registered companies figure prominently in schemes to transfer corruption proceeds and in tax evasion recycling schemes. The International Monetary Fund estimates that money laundering in China may total as much as $24 billion.
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