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.

Click here for a slide show on the strange, underground world of Chinese counterfeit cigarettes.

YUNXIAO, China—On first approach, Yunxiao seems like any other Chinese backwater caught in an uneasy industrial transition. Faded advertisements line the downtown streets, where motorcyclists wearing bamboo-frond hats vie for paying passengers in a riot of honking. A cheerful red banner in the city center exhorts citizens to develop the local economy. The message seems ironic. After all, since the 1990s, Yunxiao has sprouted its own league of millionaires, famous throughout China.

But you won't find their activity downtown.

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Ringed by thickly forested mountains, illicit cigarette factories dot the countryside, carved deeply into caves, high into the hills, and even buried beneath the earth. By one tally, some 200 operations are hidden in Yunxiao, a southwestern Fujian county about twice the area of New York City. Over the last 10 years, production of counterfeit cigarettes has soared in China, jumping eightfold since 1997 to an unprecedented 400 billion cigarettes a year—enough to supply every U.S. smoker with 460 packs a year. Once famed for its bright yellow loquat fruit, Yunxiao is the trade's heartland, the source of half of China's counterfeit production.

Slate V: Hunting Chinese cigarette pirates

Today, China's fake cigarettes—knockoff Marlboros, Newports, and Benson & Hedges—are flooding markets around the globe. They fuel a violent, multibillion-dollar black market and are even more hazardous to smokers than the real thing, yet the industry is little-known.

"Most factories are underground," a Yunxiao cigarette broker confided in hushed tones. "They're under buildings, unimaginably well-hidden, with secret doors from the basements." Even the village temple—topped with an arched red roof and twisting, frescoed spires—conceals a factory below, she said.

Cigarette counterfeiting is immensely lucrative, with profits easily rivaling those of the narcotics trade. While a pack of fake Marlboros costs 20 cents to make in China, it can fetch up to 20 times that amount in the United States. And though a drug trafficker might land a life sentence if caught, a cigarette counterfeiter usually receives a comparative slap on the wrist—a handful of years in jail or possibly a fine.

"In the last few years, pretty much every market has been targeted," said Andrew Robinson, who directs Philip Morris International's efforts to protect its brand. In 2001, Chinese manufacturers were producing eight different varieties of counterfeit Marlboros. As of last year, though, Chinese counterfeiters were manufacturing separate versions of Marlboro tailored for some 60 countries—down to the specific details of tax stamps and regional health warnings. As many as 99 percent of counterfeit cigarettes in the United States come from China.

When it comes to top-quality fakes like these, all roads lead back to Yunxiao. "Any brand or quality, Yunxiao can help you make it," said a former cigarette smuggler from Fujian. "You just need to name your price."

Villagers wary of strangers act as sentries along Yunxiao's narrow side streets and in its hotels, and outsiders are frequently tailed. Factory raids carried out by Chinese police have yielded semiautomatic rifles and met with machete-armed resistance. Every year, several state and private investigators are murdered in retaliation killings. Though Chinese authorities offer rewards of thousands of dollars for information, few residents dare to take them. "Even if you get the money," one villager said, "you won't have any life left to enjoy it in afterward."

It's hard to overstate the ubiquity of tobacco in China, home to one of the world's most elaborate and entrenched smoking cultures. Here, the introductory exchange of cigarettes is as ritualized as a handshake, and expensive brands moonlight as everything from wedding gifts to bribes—even offerings on ancestors' tombs.

As an official from the tobacco company Rothmans once put it, "Thinking about Chinese smoking statistics is like trying to think about the limits of space." Every year, China's smokers consume 2.2 trillion cigarettes. The number of counterfeits flooding the domestic market is similarly off the charts. "Each of us has come up with our own strategy to deal with it by now," confided one Beijing smoker who refuses to buy at locations where he doesn't know the owner. On trains, conductors roam the aisles, industriously hawking 75-cent keychain lights that purportedly reveal fake packs.

In China, all legal manufacture and distribution of cigarettes is state-owned and state-controlled. With cigarette sales accounting for nearly 8 percent of China's budget in 2007, the state has a strong motive to keep its supply counterfeit-free. (Officials are zealous about protecting the market, too: Until this April, officials in the central Chinese province of Hubei were required to smoke a collective 230,000 packs of regional brands a year.)

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