In Guadalajara, Mexico, graffiti artists don’t paint murals of Gan Xianbing. Nor do locals pen elegiac Narcocorridos about his exploits, as they do for traffickers like Joaquin “El Chapo” Guzman. But for the years before his capture in 2018, Gan Xianbing’s success in the city’s drug trade signaled the emergence of a new power player on the scene: the Chinese national.

As Chinese-made fentanyl — a synthetic opioid 50 times stronger than heroin — has flooded the U.S. market in recent years, Chinese nationals and Mexican cartels have worked ever closer. Gan’s role, for instance, was to handle the considerable financials: from 2016 to 2018, authorities believe he laundered anywhere from $25 million to $65 million in illicit funds. The opaqueness of the Chinese banks involved in such schemes makes it extremely difficult for U.S. law enforcement to track, which is both why U.S. officials are having such a difficult time stopping the deluge of Chinese fentanyl and why it took a member of Gan’s own ring to finally bring the law crashing down on him. 

Lim Seok Pheng had first met Gan — who also went by the nicknames “Old Gan” or “Gary” — two decades ago in Wenzhou, China, where the pair bought and sold shoes manufactured in Gan’s factories. Lim eventually emigrated with her family to New York City, and in 2011, Gan relocated to Guadalajara and opened a seafood export business. He also began washing money for the city’s ultraviolent cartels, and recruited Lim to help. 

The scheme was straightforward, but it ensured no money touched the U.S. banking system. Lim would collect the drug money in the U.S. — as much as $1.5 million in cash, delivered in $10,000 heat-pack bundles in parking lots and shopping malls — and would then bring it to an unrelated Chinese businessperson, the owner, for example, of a restaurant or bodega in Manhattan’s Chinatown district. The businessperson would use their Chinese bank account to send the equivalent in yuan to Gan’s Chinese bank account, and Lim would then, in exchange, leave the U.S. cash. Gan usually took a commission of 5 percent for his troubles; Lim received a smaller lump sum. 

To return the now-clean money to Mexico, Gan performed the same kind of transfer — only this time to a Chinese-Mexican associate with access to pesos. Again, nothing would come into contact with U.S. banks, and Chinese authorities were unlikely to flag what appeared to be a simple transfer between two domestic banks. Such “mirror” transactions — “hawala-type schemes,” according to one of the officers involved in Gan’s arrest — is nearly impossible for law enforcement to trace.

Only in Gan’s case, he was being watched. In May 2018, the authorities detained Lim at JFK airport in New York City, as she returned home from a trip to Singapore. They persuaded her to cooperate with Homeland Security Investigations (HSI), the principal investigative division of the U.S. Department of Homeland Security, and fitted her with a wire. Soon, federal agents unearthed a network of couriers, brokers and launderers all over North America, working with Mexican drug bosses.

When U.S. officials learned that Gan would have a layover in Los Angeles, on a flight between Hong Kong and Guadalajara, they swooped in, arresting him at the airport that November. In February 2020, an Illinois jury found Gan guilty on four of five counts of money laundering. It didn’t matter that Gan never personally distributed narcotics, argued U.S. attorneys in the government’s sentencing memorandum, since “drug distribution and money laundering are two-sides of the same malignant coin.”

Indeed, Gan’s operation is just one of many examples of the deepening cooperation between Chinese and Mexican drug criminals that began around 2015 and has spiked since, as Chinese fentanyl has taken hold on the streets of America. After years of U.S. pressure, Beijing finally banned the chemicals used to make fentanyl in 2019, but rather than solve the problem, Chinese fentanyl producers have shifted their strategy, leaning increasingly on their associates in Mexico and honing their operations to evade detection. Mexican drug cartels, in turn, have flooded the U.S. with so much fentanyl that traces of the drug have been discovered in everything from counterfeit Xanax to methamphetamine. 

“There are literally people overdosing on fentanyl while smoking meth because they dont know it’s in the meth. These people are getting hooked on fentanyl because it’s in other substances.”

Andrew Robinson, former director of clinical operations for the Assisted Recovery Centers of America (ARCA)

Fentanyl became “the drug,” says Errol Isom, Jr., a St. Louis street dealer who began selling it shortly before the Beijing ban. “Everywhere you went, they’d just be asking for fenty.”

When you consider that a few grains of pure fentanyl is enough to kill a 180-pound man, it’s unsurprising that the effects of the latest chapter of the opioid crisis have been the most devastating yet. Last year, U.S. deaths from synthetic opioids increased from 56,064 to 75,673 — almost as many as deaths attributed to diabetes. People are “dropping like flies,” says Andrew Robinson, former director of clinical operations for the Assisted Recovery Centers of America (ARCA), a leading St. Louis addiction treatment operation. Five years ago, fentanyl was “very limited-access,” he adds. “Now heroin has fallen off because it’s not strong enough.”

Despite Beijing’s ban, fentanyl and its many chemical building blocks still, overwhelmingly, originate in China, and they routinely find their way to the U.S. via Mexico, according to a 2020 report released by the U.S. Drug Enforcement Agency that highlighted the shifting global supply chain. And with relations between Washington and Beijing worsening over issues like Ukraine and Taiwan, experts are torn on how to stem the tide of illicit drugs. At best, China is thinly-stretched in regulating its own rapidly growing pharmaceutical industry, which is estimated to be worth $161.8 billion by 2023. At worst, it seems unwilling to stop the flood into the U.S. of the most deadly opioid on earth.

‘PRECURSOR’ PANDEMONIUM

In 1993, 33 years after Belgian chemist Paul Janssen developed fentanyl, FDA officials were sufficiently concerned about its potency that they delayed the rollout of an orally-administered version of the drug. One hundred times stronger and far more rapid-acting than morphine, fentanyl’s ability to penetrate fat has made it a favored pain relief for gastro-intestinal surgeries, but it is only administered in micrograms — one millionth of a gram — in a minority of cases. In clinical settings, morphine was, and still is, the most commonly used intravenous post-operative opioid.

In recreational settings as well, fentanyl remained in the background until very recently. Throughout the second half of the 20th century opioid addiction centered on heroin, fueled by waves of poppy cultivation in Turkey, Afghanistan and the Golden Triangle — a tract of land on the border of China’s Yunnan Province comprising the remote jungle regions of Thailand, Myanmar and Laos.

But in the late 1990s and early 2000s, as Americans increasingly became hooked on prescription opioids like Oxycontin, the profit potential of synthetic or semi-synthetic drugs became obvious. Created from chemical cocktails in labs, synthetic drugs don’t require swaths of farmland, loads of workers or long harvest times. The Golden Triangle’s illicit drug production thus shifted from poppy to methamphetamine, a stimulant that could be produced in great quantities either from tiny, mom-and-pop pill presses or giant, industrial labs spewing out millions of “yaba” — or “crazy” — tablets each year.

China’s burgeoning chemicals industry fed the production boom. Developing petrochemicals, industrial compounds and pharmaceuticals had been a focal point of Mao Zedong’s quest for self-reliance in the 1960s. And his successor, Deng Xiaoping, placed chemical output at the forefront of his “Open Door” policy in order to attract foreign investment. By 2001, China’s chemical industry was worth the equivalent of $14.4 billion — a fraction of the $1.7 trillion sold by the United States, but at the time, China’s industry was growing at 8 to 9 percent annually. In 2008, Beijing even introduced lucrative tax breaks to further boost its chemical industry. 

Pharmaceutical manufacturers, most of whom had built plants near Beijing or Wuhan, accounted for 17 percent of the industry, and increasingly, they offloaded chemical building blocks, known as “precursors,” into the Golden Triangle’s meth industry.

John Whalen is a former Drug Enforcement Administration (DEA) agent who was stationed in Yangon, Myanmar between 1997 and 2003, then again between 2007 and 2014. Throughout the period, he says, Chinese nationals controlled almost every aspect of the meth trade — from shipping precursors to running giant jungle labs to building casinos in Golden Triangle “free zones” that enabled them to “wash” the proceeds. In some cases, Chinese would acquire the ID cards of dead Burmese to move freely to and from Yunnan under a false identity. “All the precursors [like pseudo-ephedrine] were coming out of China,” he says, adding that his counterparts in Beijing “didn’t share information at all.” 

As a result, meth addiction raged across Asia, from bankers in Tokyo to tuk-tuk drivers in Manila. Most of the U.S. meth supply came from domestic or Mexican production, but around this time Chinese nationals began facilitating Mexico’s drug cartels as well. In 2007, for instance, Zhenli Ye Gon was arrested by U.S. authorities who said that his Mexican wholesale pharmaceutical company was one of the largest importers of pseudo-ephedrine. At his home in Mexico City, the authorities seized $205 million in cash.

According to John P. Walters, who was George W. Bush’s “drug czar” from 2001 to 2009, Washington struggled to engage China on the issue. “The only time they were responsive — even in making token gestures — was when our pressure and the threat of consequences to interests they valued, reached a point they had to act,” says Walters, who is now the president and CEO of the Hudson Institute, the Washington think tank. Moreover, if China arrested a producer or a member of the several-dozen “Triad” gangs profiting from meth, Walters says it “executed them so we couldn’t talk about what information they had.”

By 2014, when China had a meth addiction problem of its own, leader Xi Jinping led a crackdown on domestic drug production and corruption. China’s illicit chemists scattered across the Yunnan border to command monstrously large Golden Triangle meth cartels; the Canadian-Chinese kingpin Tse Chi Lop, for instance, who was captured last January by a coalition of 20 law enforcement agencies, is estimated to be worth $17 billion — almost nine times that of Mexico’s El Chapo.

China’s remaining chemists started turning to fentanyl around this time. Fentanyl was legal to produce for medical purposes in China — its recreational use has been outlawed since 1996 — and producers began offering the drug for sale online, enticing over two million opioid-addicted Americans with an even bigger high. Typically shipped in small packages direct to users, U.S. Customs and Border Protection didn’t have the technology to detect fentanyl shipments, and the U.S. Postal Service didn’t scan international packages. Americans could order the world’s most lethal drug as easily as their groceries.

“[China] really didn’t want to do much about it, especially on the generic controls over fentanyl. There’s clearly wilful negligence here.”

Bryce Pardo, associate director of the Drug Policy Research Center at the RAND Corporation

Fentanyl coming to the U.S. “started to be a problem,” says Bryce Pardo, associate director of the Drug Policy Research Center at the RAND Corporation. In 2014, he says, the Obama administration began asking China to take action, but the chemical composition of fentanyl made it easy to turn regulatory action into a game of Whac-a-Mole. In 2015, for instance, the Chinese issued controls over some precursor chemicals, like synthetic cannabinoids and methcathinone, but manufacturers could just tweak the compound — adding, removing or substituting single atoms — to produce any one of a “very large number” of fentanyl analogues, according to a report by the United Nations Office on Drugs and Crime (UNODC).

Music star Prince’s death from a fentanyl overdose raised awareness of the problem in the U.S., and in September 2016 the Obama administration said it and Beijing had agreed to “enhanced measures” to curb fentanyl shipments, including targeting U.S.-bound substance shipments and working more closely with law enforcement counterparts. 

But the agreement “had no measurable result,” says Walters. China’s chemical industry was now worth an estimated $1.5 trillion — 40 percent of global chemical sales — and analysts say Beijing balked at hobbling an industry generating 10 percent of its GDP. China’s FDA-equivalent, the National Medical Products Association (NMPA), claimed that just 15 of its 5,000-plus pharmaceutical producers were involved with illicit substances — a ludicrously lowball figure. In October 2016, then-Secretary of State John Kerry claimed there were over 130.

China, Pardo says, “really didn’t want to do much about it, especially on the generic controls over fentanyl. There’s clearly wilful negligence here.”

By 2017, 5,000 North Americans had died of overdoses from fentanyl and its analogues. When investigative journalist Ben Westhoff visited China, pretending to be a fentanyl dealer for his 2019 book Fentanyl, Inc., he found the situation “shocking.”

“I went to a small fentanyl lab — five employees — and they were making huge containers of one-kilo bags,” he tells The Wire. “And just two grains of rice’s worth of fentanyl can kill you. It’s staggering to think just how much this one little lab is making.”

Shortly after coming into office, President Donald Trump became the third U.S. president to try and engage China on drug control measures. After a meeting with Xi Jinping at the G20 Summit in Buenos Aires in November, 2018, Trump announced that China had agreed to control fentanyl — and, indeed, in April 2019, Beijing announced it would regulate a raft of fentanyl and fentanyl-analogue chemicals, except for firms operating under special, government-issued licenses.

There was a glimmer of hope that the tide had turned. Many of the sellers Westhoff had contacted, for instance, switched to legal substances like novel benzodiazepines and valium. And five months after Beijing’s announcement, a U.S.-China operation led to the jailing of nine Chinese nationals for fentanyl smuggling into America. The White House praised “concrete action taken by China (as) a direct result of President Trump’s strong leadership on this issue.”

“Everyone thought that this would really help the problem,” says Westhoff. “But it’s gotten much worse since then.”

THE FENTANYL FRAMEWORK

Although direct-to-mail fentanyl shipments from China have plummeted, in their place, Chinese chemical producers have cleaved even closer to Mexico. Chinese factories switched from making finished fentanyl to its precursors, and shipped them to cartels already embedded in America’s drug underworld.

At first, Chinese producers mislabeled the chemicals to sneak them past Mexican port officials. When suspicious officials seized them anyway, the black market got more creative. Cartels registered shell chemical-import firms and told their Chinese suppliers to label the fentanyl precursors correctly, mimicking the legitimate, medical import of the drug. Sniffing out bogus firms suddenly became arduous and bureaucratic. “Now you need more investigations to see whether an importer is legitimate or not,” says Pardo.

Eighteen months ago, Mexico turned over control of its ports to the Navy, which is considered one of its most effective and least corrupt institutions. In response, Chinese ships increasingly dump their illicit cargo offshore, for pickup by cartel skiffs.

As of this year, according to a U.S. government-commissioned RAND report, Mexico became the primary supplier of Chinese fentanyl into the United States. The rise of the Chinese fentanyl industry in Mexico has also displaced swathes of Mexico’s heroin industry: poppy-farming villages now receive less than a tenth of the price for opium resin than they did in 2017, driving migration away from rural and indigenous areas, according to The New York Times. 

If we can go as far upstream as possible to China, we have a much better chance of stopping it ever being made in Mexico.

Anne Milgram, Administrator of the Drug Enforcement Administration

“Chinese producers have really figured out how to tap into an existing framework for [fentanyl trafficking],” says a Justice Department official who requested anonymity because of the sensitive nature of the subject. “[They are] using the cartels, and supplying them with things like pill presses so they can finish the fentanyl in Mexico.”

Chinese nationals in Mexico have also leveraged their nation’s nubilous banking system to launder the proceeds. Like Gan Xianbing, who claimed his Guadalajara seafood business was a “dream” since he had been raised by his grandparents in a fishing village, these launderers run legitimate businesses all over North America. Gan’s closest associate, according to Lim’s testimony, led a toy distribution firm in the United States.

The China-Mexico fentanyl relationship mirrors a boom in legitimate trade between the two countries. In 2021, China-Mexico trade topped $100 billion — a new record — with 90 percent consisting of imports from China. Mexico’s import purchases from China shot up at the fastest rate of any trading partner in 2021, up 36.2 percent from 2020. 

Meanwhile, U.S. synthetic opioid overdose deaths — of which fentanyl accounts for the vast majority — have also soared, up 61 percent since 2018. Of pressing concern is that fentanyl has found its way, either via incompetence or cost-cutting, into almost every illicit drug stream in the U.S., accounting for the surge in overdose deaths. The deadly potent drug is now being found in everything from amphetamines to cocaine, often ingested by unsuspecting drug users. In February of this year, nine fentanyl overdoses — five of them fatal — occurred in one weekend in a two-block radius in St. Louis, after customers purchased crack cocaine from the same dealer. 

“What I have noticed here in the last six to eight months, they are putting fentanyl in everything now,” says Robinson, the addiction expert. “There are literally people overdosing on fentanyl while smoking meth because they don’t know it’s in the meth. These people are getting hooked on fentanyl because it’s in other substances.”

Given the level of carnage, the lack of Chinese attention or action to the problem can feel purposeful to some U.S. observers. Some China hawks have even suggested that the fentanyl epidemic is revenge for the Opium Wars, which China lost to Britain and France in the mid-1800s. The “Century of Humiliation” that followed is a historic cornerstone of President Xi’s 2013 call for a rejuvenative “China Dream.”

“This is a level of conflict below armed conflict that’s intended to damage the United States — and, I think, other democratic governments in the western hemisphere,” says Walters, Bush’s drug czar. “Can [China] stop it? Of course they can stop it. We have to find something that is of sufficient value that we can put in front of Xi’s regime, that they will be sufficiently curbed.”

A big part of the problem, analysts say, is that China’s anti-drug infrastructure is exceptionally weak: its FDA-equivalent, the National Medical Products Administration (NMPA), has gone through three iterations in the past decade, and hasn’t produced a public report since the 2018 one that claimed China was home to only 15 illicit fentanyl or fentanyl-analogue producers. 

Moreover, China only has 2,065 chemical inspectors, according to 2017 data, and has a hard time hiring and training inspectors, “because the salaries can’t compete with private industry,” says Pardo. Even today, NMPA inspectors give factories three days’ notice before an inspection — ample time to switch production of black-market compounds.

If China wanted to fix these problems, it could. But analysts say the incentive to do so is just not there. So far, analysts say that China has refused to accept any blame for the crisis. In September 2021, for instance, the Chinese embassy in Washington, D.C. said claims that American fentanyl originated in China were “highly irresponsible and utterly false.”

China “subordinates its counter-narcotics cooperation to its geo-strategic relationships,” says Vanda Felbab-Brown, a senior fellow at the Brookings Institution who has researched global crime, counter-narcotics and conflict for over two decades. “And as the U.S.-China relationship has obviously become one of open competition and essentially Cold War, China has reduced cooperation.”

Indeed, many analysts note U.S. pressure alone is unlikely to sway Beijing into further action, especially considering the many competing priorities in the U.S.-China relationship. The White House’s best bet, some say, is coalition-building, via multilateral fora like the UNODC. This route could be especially effective if drug-affected nations from the EU to Southeast Asia lend their support.

“There’s room for other countries that are being affected by this to put some pressure on China,” says the Justice Department official. “Because what China doesn’t want is the rest of the world pointing a finger at them and calling them a narco-state.”

Still, even if China bowed to international pressure and helped stop the flow of precursors to Mexico, some fear that the cartels will soon possess the skills and tools to develop fentanyl themselves. China’s role would then shift to exporting “pre-precursor” chemicals such as 4-Piperidone, a common building block for all kinds of medicines that would stand no chance of being controlled. Is there any way to stop the Whac-a-Mole? “Personally,” says Westhoff, the author of Fentanyl, Inc., “I don’t think there is.”

Last month, amid news that yearly U.S. deaths from drug overdoses had topped 100,000 for the first time ever, DEA chief Anne Milgram pleaded for Beijing to “do more” to combat the flow of fentanyl via Mexico. “If we can go as far upstream as possible to China, we have a much better chance of stopping it ever being made in Mexico,” she told CBS News.

But the deepening ties between Mexican traffickers, Chinese chemical companies and launderers like Gan Xianbing ensure that profits from fentanyl continue to soar. Gan himself will see none of them: last November he was sentenced to 14 years in prison, and U.S. officials have arrested two other members of his network. But there are many more poised to fill his shoes. The Justice Department official is unsure how many Chinese nationals are now in Mexico helping to wash cartel cash, but estimates it to be “several thousand.” 

That is daunting news for those at the frontlines of America’s devastating opioid crisis. “It’s like standing at the ocean, watching the water going out and knowing that a tidal wave is coming, and you’re going to have to try to stop it,” says Robinson. “It’s scary, man.”

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