Counterfeit Cigarettes
Hong Kong customs seized a truck carrying 1.4 million cigarettes on which the duty had not been paid on June 12 as the driver was attempting to cross the Man Kam To checkpoint from Shenzhen, Guangdong province. Few details are available on the case, but it allows STRATFOR to examine the phenomenon of Chinese counterfeit cigarette production and smuggling, which commonly moves through Hong Kong.
In this case, the cigarettes were worth 3 million HK dollars (about $385,000) meaning a duty of 1.7 million HK dollars (about $220,000) should have been paid. The driver was arrested for "importing unmanifested cargo" which is punishable by a fine of 2 million HK dollars (about $260,000) and a seven-year jail sentence.
STRATFOR sources believe this case is part of the counterfeit cigarette smuggling operations especially prevalent in southeastern China. Most counterfeit production occurs in Fujian and Guangdong provinces where small hidden factories are controlled by local <organized crime> [Link: They usually have a protection agreement with local officials, as even possession of raw tobacco in significant quantities is illegal. (The government has a monopoly on materials to manufacture cigarettes, and thus only state-owned enterprises are legally sanctioned to produce them.) In the production process, everything from packaging to tax stamps are counterfeited which provide the added value. They are thus able to charge the same price as genuine product and have already avoided the taxes, which are often 50% or more of the selling price. (Ironically, genuine cigarettes are often smuggled into the Mainland through Hong Kong in order to avoid taxes as well)
Once the fake cigarettes are produced they are shipped by boat overseas, or by road to Shenzhen, Guangdong to cross into Hong Kong. At their first destination, a trans-shipment point, they are repackaged and mixed with genuine cigarettes for sale in Asian or other markets. The Philippines is the most well known transshipment point but Hong Kong is not an uncommon one. And further shipments may not be needed as cigarettes already fetch a substantially higher price in Hong Kong than on the mainland. Due to the illegal nature of this activity details on the final destinations of counterfeit cigarettes are murky, but it likely follows the usual <counterfeit supply chain> [LINK:
We do not know if the June 12 seizure was part of this process, but due to the amount of trade between Hong Kong and the Mainland it would be a surprise if the cigarettes did not use fake tax stamps to get through. Fake cigarettes are nearly impossible for inspectors to differentiate from genuine ones, especially after they are mixed together and have counterfeit certificates. The border guards may have been alerted to the incoming shipment, or the smuggling operation may not have paid the right people off. This week's case was an exception to the lucrative illegal trade that usually proceeds uninhibited due to corruption and high quality counterfeiting capability.
Bohai Bay Pirates [say “aiyeeeeeeeeeeeeeeeee” (because they can’t pronounce “rrrrr”)]
In the previous month, there have been three cases of low-level piracy in Bohai Bay, near the port of Tianjin. The incidents involve groups of young men raiding shipping vessels, demanding ransoms that are not delivered and robbing the ships. These attacks have not disrupted shipping in the Bay as they have been isolated to its southern coastline, and authorities are responding to keep them from causing greater disruption.
In the most recent case on June 10, a group using small fishing boats attacked a 260-foot cargo ship carrying 4,500 tons of stone from Laizhou, Shandong province. The Qiong Yang Pu was first boarded by several (unknown number, less than ten) young men from two small boats who demanded it stop near the Huangghua Port in Hebei province (near Tianjin). The men claimed the ship was in their territory and must pay them 100,000 yuan (about $15,000) to pass, but were not paid. Instead the Qiong Yang Pu sped up, but the pirates called for help. Soon another six boats arrived, each with 7-8 people carrying sticks or knives. They also boarded the cargo ship and destroyed its communications equipment and radar. They stole 4,700 yuan (about $690) and random equipment they could carry such as steel pipe and a telescope.
The June 10 pirates seemed to have grown in number and demanded higher ransom in comparison to recent attacks on similar ships. In the first reported case, May 26, the Guo Xian II, another cargo ship, was robbed of 3,000 yuan (about $440) in cash. Then on June 4, the Guo Xian I (a different vessel owned by the same company) was confronted by 3 fishing boats from which 11 men boarded the ship. This was also near Huanghua, sometime after the ship left Binzhou, Shandong province. The pirates demanded 50,000 yuan (about $7,500) in ransom, but only made off with 4,000 yuan (about $590) in cash and four diesel fuel containers worth 5,200 yuan (about $760). All three ships were of similar size, crew and cargo meaning the last would not necessarily require more pirates. Rather the larger use of force shows the gang becoming better organized and its ability to communicate boat-to-boat.
All of the victims were involved in shipping stone for the construction of the new Binhai Economic Zone in Tianjin. They would follow similar routes that likely do not go far out into international shipping lanes due to the short distance. They seem to have all been targeted in the same area, near the coast of Bohai and Huanghua, Hebei province. There are no reports of attacks on ships that would be on routes farther out to sea, which may indicate these pirates are staying close to land and are not proficient sailors. It also gives the authorities a very good idea where their home base is located. No pirate can stay out to sea very long, and their local bases are usually the best target for authorities, rather than trying to catch individual boats on the water.
Bohai Bay is well monitored by Chinese Coast Guard who have increased local patrols in response to this wave of amateur piracy. The Huanghua Public Security Border Defense Corps has also launched an investigation and increased patrols. With the authorities closing in from all sides, these pirates will be found and arrested sooner rather than later.
BULLETS [Please send to both Colby and Sean for F/C]
June 10
Luohu Customs captured a Hong Kong woman in Shenzhen, Guangdong province with 13 kilograms (about 28 pounds) of gold tied to her waist. She was attempting to carry the gold from the Chinese mainland into Hong Kong. The gold, valued over 3.5 million yuan, (about $520,000) is a controlled resource and therefore cannot be carried out of the country.
A man killed one and wounded two others in a knife attack in Changle, Fujian province on the morning of June 9, Chinese media reported. A few days before (unknown) the same man murdered a woman who rejected him in Xiamen City. The man is currently in police custody and the case is being tried.
Xu Shexin, the former vice chairman of Bengbu Municipal Political Consultative Conference was sentenced to 14 years in prison in Suzhou, Anhui province, Chinese media reported. Xu was earlier convicted of accepting almost 2.5 million yuan (about $400,000) in bribes from 82 different people from February 2002 to March 2008.
The Taiyuan Municipal Intermediate People’s Court in Taiyuan, Shanxi province convicted 31 suspects of gang-related crimes. The gang's leader, Niu Jungang, was sentenced to 20 years in prison and fined 400,000 yuan (about $60,000) for crimes including illegal gambling and weapons possession. The other defendants were given sentences ranging from 1 to 19 years for various crimes.
June 11
A former Huaping County Local Tax Bureau employee was sentenced to 12 years in prison for embezzlement of public funds in the amount of close to 1.5 million yuan (about $220,000) in Lijiang, Yunnan.
Changchun police raided a night club and KTV club in Jilin province and found illegal female companions, gambling and drugs. More than 30 of the women were taken away by police and the hotel where the KTV club is located were fined 20,000 yuan (about $3000) and closed for 3 months. Female companions are not necessarily prostitutes and are common in high end entertainment establishments. Under Chinese regulation on entertainment venues, they cannot charge for providing employees as companions for customers.
Police in Hengyang, Hunan province announced they broke up the largest known counterfeit ring in China on April 30. Four suspects were arrested under suspicion of producing 210 million yuan (about $31 million) in counterfeit bills in a rented space registered as a 'print shop." Along with 9 million yuan (about $1.5 million) in cash, money forging materials were also seized in the raid. The ring was revealed after 67 million yuan (about $10 million) was found on April 27 in a long-distance bus parked at a gas station between Hunan and Guangdong.
June 12
A police detective, Wang Fengliang, was arrested for the shooting murder of a family of three and injuring the local police chief in Taipusi Banner, Inner Mongolia Region. The police chief responded to a 2 a.m. call that Wang was suspected of killing the family. Upon arrival at Wang's home a standoff ensued in which the chief was shot twice. The police chief has been hospitalized and the investigation into the murders is ongoing.
The Health Ministry called for increased bird flu control and prevention measures after a woman died in Ezhou, Hubei province from the disease. Shanghai and Guangzhou, the sites of the 2010 World Expo and Asian Games respectively, have formulated emergency plans to deal with any spread of the disease.
Beijing police annoucned that in the past 12 weeks they have arrested 138 suspects in the pornography industry, broken up 213 prostitution rings and levied punishment on 39 entertainment centers in the capital city. The Beijing police also announced that an IC (information card) program is going into effect soon for entertainment employees in Beijing. The card would have personal information such as identity numbers and employment records. The police state that the IC program will help them to better protect the legitimate employees (and attempt to distinguish them from illegal operations).
June 13
27 primary school students became ill after inhaling poisonous gas in Nanning, Guangxi province. The children became dizzy and began vomiting while in class. 20 students exhibiting serious symptoms were taken to Wuming County People’s Hospital and all are in stable condition. Police continue to investigate the cause.
The Ministry of Public Security announced the start of a "strike hard campaign" against crime nationwide. It is the fourth such campaign since 1983, with the most recent in 2001. China has recently seen a rise in crime and social conflict which has led to the current seven month crackdown. Police are expected to focus on a list of crimes including extreme violence, human trafficking, drugs and prostitution. Besides the increased focus of law enforcement, it is common for the judiciary to impose harsher sentencing in a shorter amount of time.
June 14
Film Director Yan Po was attacked by four knife wielding men in a public underground parking lot in Beijing June 8, Chinese media reported. The attack left Po in critical condition at a local hospital. Two men confessed to paying eight accomplices to carry out the assault after being upset over Yan dating a friend’s ex-girlfriend. Police are still investigating the case.
The Ministry of Public Security announced the results of a gambling crackdown that began in February to warn off those planning to bet on the World Cup. A nationwide effort has opened 740 gambling cases, made over 3,600 arrests and collected 700 million yuan (about $100 million) in funds. Almost 200 of the arrested individuals can be traced to gambling organizations located in Hong Kong, Macau, Malaysia, and the Philippines. During the World Cup the Ministry will be paying extra attention to online soccer gambling and are planning to dole out harsh penalties for anyone participating in
Five men were sentenced over the August, 2009 murder of Li Xingguang, the director of Hegang Municipal Transport Bureau in Harbin, Heilongjiang province. Li’s predecessor Bai Yuku paid Xu Guangdong 260,000 yuan (about $40,000) to commit the murder through 3 middlemen, one of which was his cousin, Wang Jianbo. Bai and Xu were given the death penalty and Wang was given the death penalty with a two year reprieve. The other two men were given life in prison. All five defendants have filed an appeal with the court.
June 15
A father and son were attacked by tigers in Xi’an, Shaanxi province after walking through two open gates to enter an enclosure that houses around 50 tigers in captivity. Five of the tigers were involved in the attack that left the father dead. The son only had minor injuries. A Qingling Wildlife Park worker has been detained for questioning in relation to the gates that should not have been open. A witness that saw the event unfold has stated the pair followed a tour bus into the enclosure.