No, China is not really slowing down the production of fentanyl precursors

China has announced new controls on the production of precursor chemicals used to make fentanyl, the deadly illegal drug that kills thousands of Americans each year. But the new controls do nothing to dismantle the domestic policies that have led to China’s fentanyl dominance, and they apply to just three precursor materials out of the hundreds that have been produced, promoted and exported by China over the past two decades.

On August 7, The Financial Times reported the change in China’s regulation of the three precursors: 4-AP, 1-boc-4-AP and Norfentanyl. But as the paper noted, UN member states already approved those restrictions in 2022. China has been a major global source country for synthetic illicit drugs or their precursors for nearly two decades. Nearly all methamphetamine is produced using precursors from China.

The new controls, the result of a cooperation agreement reached by Presidents Joe Biden and Xi Jinping in November 2023, may seem like a sign of commitment to combating drugs, but the Chinese government has been subsidizing fentanyl production through tax rebates for years.

Fentanyl, a synthetic opioid 50 to 100 times more potent than morphine, is a leading contributor to the U.S. overdose crisis. In 2022, it was linked to about 71,000 of the more than 100,000 reported U.S. overdose deaths. Even a 2-milligram dose can be fatal.

While fentanyl and other synthetic opioids are smuggled into the U.S. by Mexican cartels, nearly the entire global supply comes from China. Fentanyl is no exception. As reported in a paper by the U.S. Congressional Committee on the Chinese Communist Party, Chinese companies are the largest global supplier of methamphetamine, ketamine, tramadol, nitazenes and xylazines.

This market dominance is the result of the CCP’s promotion and protection of illegal pharmaceutical industries.

The Financial Times article, written by Demetri Sevastopulo, reported that China’s new controls on three precursors are a sign of enhanced cooperation with the US. Regarding the Biden-Xi agreement, a spokesperson for the Chinese embassy in Washington, Liu Pengyu, said, “China has always attached great importance to international cooperation in counter-narcotics and is willing to work with countries around the world, including the United States. We hope that the US side can work with China in the same direction and continue our cooperation on the basis of mutual respect, managing differences and mutual benefits.”

The Financial Times and Liu Pengyu overlook two inconvenient facts.

First, the CCP has not only allowed the export of fentanyl and its precursors, but has also promoted them. It is alleged that in some cases, production activities appear to have direct ties to the government. In leaked documents, companies boasted that the CCP owned them and that their illegal products were tax-free.

China has a value-added tax (VAT) system that reduces or eliminates taxes on exported goods through a “refund tariff” mechanism, providing incentives for companies to produce and export certain products. It is a trade policy tool to regulate export prices and increase international competitiveness. As of 2018, the VAT system is believed to have stimulated the export of at least 17 illegal narcotics that are Schedule I controlled substances and have no legitimate purpose, including 14 fentanyl analogues. Analogs are chemically similar to existing substances, designed to mimic or modify the effects of the original, while varying slightly in structure to circumvent regulatory restrictions or enhance specific properties.

The CCP gave unusually high sales tax rebates of 13 percent for synthetic narcotics, compared to the standard rebates of 3 percent, 6 percent and 9 percent for most other commodities. The April 2024 Select Committee report on the U.S. fentanyl epidemic said those subsidies had remained in place to that point.

Furthermore, the CCP’s new controls target just three chemicals out of the hundreds produced and exported by China to make fentanyl. Synthetic opioids, such as fentanyl, can be made through a variety of chemical processes that require specific precursors. The CCP subsidizes NPP and ANPP, the two precursors most prized by Mexican drug cartels, and has no controls in place. In addition, the U.S. has begun seizing larger quantities of boc-4-piperidone (the other fentanyl precursor proposed for international control), 2-phenethyl bromide (including one shipment of 660 kilograms), and para-fluorofentanyl. These findings suggest that traffickers have diversified into illicit production of more fentanyl end products, circumventing U.S.-China agreements. Chinese criminals have used a similar approach to produce “new substances” and circumvent regulatory controls. ‘Novel substances’ are designed to mimic the effects of existing illicit drugs or to produce new psychoactive effects.

Other synthetic opioids may use other precursor chemicals. The production of all synthetic illicit drugs involves complex chemical reactions that usually require specialized knowledge and equipment.

China has long claimed it cannot control illegal activities in its chemical and pharmaceutical industries because of the difficulty of identifying manufacturers who export synthetic narcotics. But to receive a VAT refund, a company must provide the government with details of the name and quantity of the substance it exported, including full identification and sales records. The April 2024 U.S. Select Committee report also presented solid evidence that the CCP provided cash subsidies and rewards to companies that openly traded illicit fentanyl online.

Without addressing the CCP’s systematic support for illegal narcotics, the new controls on three precursors are little more than a public relations stunt to save face and cover up the Party’s complicity in this deadly problem. If China wants to be a good global citizen, it must abolish VAT subsidies on illegal pharmaceuticals, strengthen regulatory oversight and domestic law enforcement efforts against narcotics, and address the shortcomings in compliance with international regulations for all illegal pharmaceuticals.

While Australia does not currently have a fentanyl problem, we do have a methamphetamine epidemic. Our epidemic, like the US, is fueled by precursor chemicals produced in China. It is vital that Australia has an independent, sovereign foreign policy, but it is vital that Australia and the US take a common stand against China’s role in illicit narcotics.