China is funding the United States’ fentanyl crisis by using tax rebates to subsidize the manufacture and export of raw materials for the drug, a U.S. congressional report found.

The U.S. House of Representatives Select Committee on the Chinese Communist Party report on Tuesday pointed to China as “the ultimate geographic source of the fentanyl crisis,” where Chinese companies “produce nearly all of illicit fentanyl precursors, the key ingredients that drive the global illicit fentanyl trade.”

The CCP also holds interests in several of the Chinese companies, the report added.

The accusation comes as both countries have pledged to co-operate to fight the global trafficking of fentanyl. The U.S. also alleged that China, despite its vast control over the internet, has failed to regulate its online sales of the materials via e-commerce and social media.

At present, fentanyl kills an average of more than 200 Americans every day, and more than 97% of fentanyl raw materials come from China. 

“As long as China does not manufacture and export fentanyl and its raw materials, there will be no fentanyl crisis in the United States,” said former U.S. Attorney General William Barr at the congressional hearing.

“Fentanyl is often distributed in the form of prescription drugs that make people think they are taking the painkiller Percocet, the anti-anxiety Xanax or the stimulant Adderall. These medications are immediately available on social media and online, and even if they are used as opioids, victims are unaware they may contain lethal doses of fentanyl,” Barr said.

The report pointed out that since 2018, the value-added tax refund implemented by Beijing is equivalent to a subsidy, which has resulted in a significant increase in the export of fentanyl raw materials. These exports involved many state-owned enterprises, such as Gaosheng Biotechnology in Shanghai and Yafeng Biological Technology in Shijiazhuang, Hebei. 

Earlier this year, the committee found that more than 30,000 Chinese companies were selling illegal drugs on seven e-commerce websites. In addition to guaranteeing consumers that the sales will not be inspected by customs, these Chinese companies also accept cryptocurrencies as payment.

Ray Donovan, former operations chief at the U.S. Drug Enforcement Administration said at Tuesday’s hearing that the findings “regarding Chinese chemical manufacturers, any intermediaries supported by the Chinese Communist Party, and the Chinese government are true, reliable and have conclusive evidence.” 

He said Mexican transnational drug trafficking groups have always been U.S.’s key target. In the past decade or so, more and more laboratories there have used Chinese raw materials to synthesize drugs, and at the same time, an increased number of Chinese laboratories have emerged. 

The leaders of the U.S. and China reached a consensus on combating fentanyl in November last year. But several former U.S. officials at Tuesday's hearing said China has taken no effective action since then.

David Luckey, a researcher at the RAND Corporation, a US think tank, pointed out that strengthening the review of sea and air containers and goods from China, as well as detecting related chemicals and drug advertisements on the Internet, can effectively disrupt the fentanyl supply chain.

In this regard, former U.S. Attorney General Barr believes that facts have proven that the United States cannot count on the will or goodwill of the Chinese government. Therefore, the issue of fentanyl must also start from economic and trade policies and introduce punishment and accountability mechanisms.

Translated by RFA Staff. Edited by Mike Firn.