US politicians say China giving tax rebates to fentanyl makers

Drug epidemic is leading to ‘chaos and devastation’

China is directly subsidising production of fentanyl precursors intended for sale into the illegal drugs market – and this is fuelling the US opioid crisis, a US congressional committee said yesterday.

It released findings from an investigation which it said unveiled Beijing’s incentives for the deadly chemicals.

China provides subsidies – in the form of value added tax rebates – to Chinese companies which manufacture fentanyl analogues, precursors and other synthetic narcotics – so long as they sell them outside of China, the House of Representatives’ select committee on China said in a report.

“The PRC [People’s Republic of China] scheduled all fentanyl analogues as controlled substances in 2019, meaning that it currently subsidises the export of drugs that are illegal under both US and PRC law,” the report said, adding that some of the substances “have no known legal use worldwide”.

The report cited data from the Chinese government’s state taxation administration website, which listed certain chemicals for rebates up to 13pc. It additionally currently subsidises two fentanyl precursors used by drug cartels – NPP and ANPP, it said.

According to the Chinese government website, the subsidies remain in place as of April, the report said.

China’s embassy in Washington and the US State Department did not respond immediately to requests for comment.

Mike Gallagher, the Republican chair of the bipartisan select committee, told a hearing on the issue on Tuesday that China’s incentives suggest Beijing wants more fentanyl entering the US.

“It wants the chaos and devastation that has resulted from this epidemic,” Gallagher said.

Fentanyl is a leading cause of drug overdoses in the United States. The US has said that China is the primary source of the precursor chemicals synthesised into fentanyl by drug cartels in Mexico.

Mexico’s government also has asked China to do more to stop shipments.

China denies the allegation, and says the US government should do more to reduce domestic demand.

The US and China launched a joint counter-narcotics working group in January, following an agreement between the US president and his Chinese counterpart.

Joe Biden and Xi Jinping agreed last November to work to curb fentanyl production and export. US officials described the initial talks as substantive, but have said much more needs to be done to stem the flow. The committee said it found no evidence of new criminal enforcement actions by Beijing.

Ray Donovan, a former senior DEA official, told the hearing that the November agreement had not changed China’s willingness to support the illicit chemical industry’s supply to the Western hemisphere.

“Beijing subsidises the export of drugs that are illegal in the US and China”