President Trump recently amplified his already sharp criticism of China, blaming the country for the U.S. fentanyl crisis and escalating the trade war in response. Chinese officials call his allegations on fentanyl “groundless and untrue,” insisting China has controlled its illicit chemical industry and recently banned production of all fentanyl-type substances.
I’m doubtful that will substantially curtail the U.S. fentanyl epidemic — which has piggybacked on the prescription pill and heroin crises to create the worst drug problem in our history. We’ve heard these types of pledges from China before, and they’ve proven ineffective. Even as China has vowed to crack down, it has simultaneously showered this illicit industry with government funding.
I discovered this firsthand in early 2018 when researching my new book “Fentanyl, Inc.” I arrived in China shortly after it had banned two key fentanyl ingredients (called precursors) known as NPP and 4-ANPP. I wanted to know if I could still buy other precursors, so I visited a Chinese chemical company called Yuancheng, located in the central China metropolis of Wuhan.
According to my research, Yuancheng was a major exporter of fentanyl precursors, but it does not operate clandestinely. It publishes its address on the internet, and invites interested customers to come visit its operations. Posing as a prospective customer, I saw sales floors staffed by hundreds of perky college graduates, who send emoji-laden messages from their cubicles to clients based largely in Mexico and the U.S. Yuancheng salespeople told me they would be happy to sell me fentanyl precursors that were not “scheduled,” or illegal, in China and showed me fake packaging used to send the precursors abroad — including dog food and banana snacks wrappers — to bypass customs inspections more easily.
“Anything that the country schedules, we don’t sell,” Chief Executive Ye Chuan Fa told me in a follow-up interview after I later revealed my identity as a journalist. “If it’s not scheduled, we can sell it.” He fully acknowledged selling chemicals that can be used to make fentanyl, though he denied knowledge of exactly what they were being used for. He also said he knew little about the U.S. crisis.
Though prescription narcotics and heroin initially fueled the opioid crisis, illicit fentanyl and similar drugs have overtaken them, killing more Americans (nearly 32,000 in 2018, according to early estimates) than both the other types of drugs combined. China produces the vast majority of this fentanyl, which Trump has described as “almost a form of warfare.” On Aug. 21 his administration placed sanctions on three Chinese nationals suspected of synthetic opioid trafficking, and the proposed Fentanyl Sanctions Act, co-sponsored by Sen. Charles E. Schumer (D-N.Y.), targets Chinese manufacturers.
China’s chemical industry is sprawling and out of control. Of its 400,000 chemical manufacturers and distributors — which create more than 100 billion in annual profits — most operate legally, some operate illegally, and others are in between. Owing to insufficient staffing, bureaucratic confusion, and competing interests between layers of government, China’s regulatory agencies are unable to properly monitor these companies, and have, at times, refused to let American agencies do so.
The problem, however, is worse than American officials imagine. China is not only failing to stop its chemical industry from exporting these dangerous chemicals, it is actively encouraging the practice through tax breaks and other subsidies. These financial incentives were intended to spur export growth in China’s legitimate chemical industry, but have also benefited companies exporting fentanyl, fentanyl analogues, and fentanyl precursors, including to Mexican cartels and U.S. drug dealers.
In 2018, amid trade war tensions, China quietly raised the value added tax (VAT) rebate companies receive for exporting fentanyl, from 9% to 10%. VAT rebates are raised to spur exports.
Tax breaks aren’t the only way China subsidizes the opioid epidemic. In China, chemical companies developing certain types of new drugs can be designated New and High Technology Enterprises (a designation Yuancheng has had since 2011). The label brings a bevy of incentives, including support for research-and-development efforts and staff training. China’s Ministry of Science and Technology also delegates resources to these companies and helps establish special economic development zones, which seek to promote Chinese businesses, through subsidized land, subsidized rent, shared manufacturing infrastructure, and other resources.
It is not clear whether top Chinese officials realize the country is funding companies that produce or facilitate the production of fentanyl. But it is clear these incentives directly undercut China’s stated goal of reining in its rogue chemical industry.
Trump seems likely to double down on punitive action against China, perhaps with more tariffs. But U.S. efforts to address the issue are unlikely to have much effect. Controlling China’s chemical industry from our own shores —without much help from China — is simply too great a task.
Decades of War on Drugs failures make clear that focusing on the supply side isn’t enough. We should of course make clear to China that it must discontinue all subsidies for fentanyl and its precursors, and we should enlist our allies to make the case as well. But even if we somehow succeed in hobbling China’s illicit chemical industry, other countries like India will fill the void.
Instead, we should focus on the demand side, employing new technology and out-of-the-box approaches with proven records of success, including test strips to help users determine whether fentanyl is in the drugs they acquire. Such testing has received funding in some states, but remains illegal in others, including Pennsylvania. Supervised injection facilities have been successful in helping curtail the illicit drug market in Canada and Europe, but they are banned in the U.S. Ultimately, making a sustained effort to battle the root causes of addiction is the most lasting solution.
Ben Westhoff is a journalist and author of “Fentanyl, Inc.: How Rogue Chemists Are Creating the Deadliest Wave of the Opioid Epidemic”