The strange, underground world of Chinese counterfeit cigarettes.

Notes from different corners of the world.
June 29 2009 3:02 PM

China's Marlboro Country

The strange, underground world of counterfeit cigarettes.

(Continued from Page 1)

Accordingly, counterfeiters deploy a number of tricks to dodge authorities. One manufacturer built a factory that masqueraded as a military compound, complete with 20 laborers—dressed in castoff army uniforms—who would conduct faux-military drills and sing the national anthem in the yard every morning. Other cigarette-making machines have been hidden on ships, inside concrete bunkers, and even under a lake.

Back in the 1990s, Chinese counterfeits often came with misspelled health warnings, blurred lettering, and other obvious giveaways. These days, their sophistication sometimes challenges forensic investigators. In the United Kingdom—where authorities report that up to one-third of all cigarettes sold in some areas are fake, mostly from China—customs officers have deployed a trained dog to sniff out counterfeits on the streets.

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For the enterprising smuggler, custom-made fakes are only a few clicks away. Manufacturers openly court clients through online storefronts, touting quality guarantees and their equipment's international caliber. One Yunxiao operation, established in 1993, assures customers of its experience exporting to Asia and Africa and says it maintains its own tobacco fields in Laos. The company—which churns out 80 million cigarettes a week—promises a six-day turnaround, door-to-door delivery for certain overseas clients, and impeccable customer service.

The tone is reassuring and gently instructive. For hesitant buyers, the owners guarantee that the U.S. market in particular is a "profit business."

"We strive to build and maintain a total honesty management culture," the manufacturers say, "and will appreciate the chance to do business with you."

But for U.S. consumers, inhaling the knockoff cigarettes may do even more damage than their genuine counterparts. Lab tests show that Chinese counterfeits emit higher levels of dangerous chemicals than brand-name cigarettes: 80 percent more nicotine and 130 percent more carbon monoxide, and they contain impurities that include insect eggs and human feces.

None of that stops counterfeiters, who reap prodigious rewards from the trade. According to manufacturers in Yunxiao, state-of-the-art cigarette-making machines can set a factory back $1.5 million to $3 million. "But everyone knows that the investment can be recouped in just a few months of manufacturing," a Yunxiao cigarette broker told me.

Even area officials speak of the region's counterfeiting prowess with pride. "For a long time now, a lot of Yunxiao's cigarettes have gone to Russia," said one police officer. "The feedback from Russian customers is that they've gotten used to the fake flavor, and now they don't want the real ones anymore."

The broker says Yunxiao might change someday, but the transition could take many years. One of the manufacturers she knows invested $2.5 million to start a legitimate business elsewhere, but recently quit and returned—disappointed because "the profits could never match counterfeit."

Still, she hopes the industry will make a shift: "We locals would like to see Yunxiao start its own legal cigarette factory someday."

Te-Ping Chen is a staff reporter with the International Consortium of Investigative Journalists, a project of the Center for Public Integrity.