Notes from the Underground
Crime The bust of a multimillion yuan counterfeiting ring in Dao County, Hunan spurred a provincial-led crackdown that aims to uproot forgery from the region once and for all
In January, police in Yongzhou, Hunan Province raided a counterfeiting hideout in Dao County, seizing 8.58 million yuan (US$1.3M) in fake bank notes and equipment including printers, inks and paper. Dubbed “China's second central bank,” Dao County is notorious for counterfeiting. County authorities have confiscated 23.52 million yuan (US$3.5M) in fake notes since 2018, 80 percent of the total for Hunan Province, with 174 arrests for forging notes, or 8 percent of the province's total.
Che Lihua, director of Yongzhou public security bureau, told Newschina that Dao County is one of several hotspots in China for banknote forgery. “In Dao County, especially the town of Shouyan, you can find every link in the counterfeiting chain,” he said.
In response, authorities rolled out a crackdown in 2020. According to Hunan Television, the campaign has so far handled 24 cases, raided 12 hideouts, arrested 109 suspects and seized 19.82 million yuan (US$3.07M) in fake currency.
While police hope the campaign can uproot such criminal activity in Dao County, Che said that the solution lies in governance at the most local levels.
Buzzing Printers
According to Li Wei, a police officer with the Dao County anticounterfeiting task force, the Yongzhou case began by tracking Chen Ping, a farmer who made numerous suspicious purchases of rag paper, the fibrous paper commonly used in print currency.
Chen led Li's team to Guangdong Province, the largest producer of raw materials used in banknote forgery. There they learned that Chen's group was preparing to print vast quantities of fake notes.
After a months-long investigation, police arrested four of Chen's associates. “When we broke into one of the hideouts, the printers were still buzzing,” Li said.
According to Che, the Dao County suspects used to purchase fake notes from Guangdong counterfeiters and continued processing them back home. But as computer printers became more accessible, counterfeiters could make forgeries from scratch using digital printing plate files, all without leaving Dao County.
“In Guangdong, counterfeiters mostly use big machines, but Dao County forgers prefer low-cost home printers,” Li told Newschina, adding that since 2014, when there were dozens of counterfeiting rings using computer printers, now there are hundreds.
According to Dong Yongxian, director of the anti-counterfeiting lab of China's Ministry of Public Security (MPS), while printing plate files and instructions are readily available online, the art of counterfeiting is still difficult to master.
“[Counterfeiters] have to overlay colors and do multiple pressings to give them the right feel... It involves very complicated and sophisticated techniques that directly determine the success of a fake note, so [skilled] technicians are valuable to any criminal operation and they are very well compensated,” Dong told the Xinhua News Agency in a 2019 interview. “Some experienced technicians are even able to mix colors very close to those of a real note,” he said.
Because technicians cut off all connections to the outside once they enter a counterfeiting base, locating them is a major challenge.
Li said the organizations have clear divisions of labor. “Printers never deal with processing and processors never get involved in sales,” he told Newschina. “They are structured like a pyramid, and the higher the suspect is in rank, the more difficult it is for police to find them.”
However, Li said forgeries from Dao County are easy to distinguish because counterfeiters there opt for quantity over quality. “Super
real notes mean very high overhead and low profit... As most county counterfeiters think it's easier to forge notes than work jobs in the cities, they prefer higher output [at lower quality],” Li said. “Forging a 100 yuan note costs 3-4 yuan (US$0.4-0.6) and sells for 10 yuan (US$1.5). That's a huge profit margin.
“A group [in Dao County] usually prints millions of yuan at a time,” he added.
Dao County counterfeiters prefer smaller denominations, according to Li, as they promise quick returns and are more likely to circulate undetected. This February, Dao County police busted another forgery plant where they found 3.64 million yuan (US$0.5M) in 20 yuan notes.
Weak Arms of the Law
Counterfeiting in Dao County first caught on in the 1990s after a wave of Hong Kong printshops moved their operations to Guangdong Province, where labor was cheaper. The result was a lot of trained technicians. Because of its strategic location, Dao County also serves as a hub between Guangdong Province and Guangxi Zhuang Autonomous Region to the south, which borders Vietnam.
In early 2009, the MPS launched a national anti-counterfeiting campaign in 10 provinces and municipalities. The Guangdong cities of Lufeng and Huilai and Hunan's Dao County were identified as counterfeiting centers.
“Dao County's operations involve buying raw materials from one place, counterfeiting locally and then selling to another place,” reads a paper published on the website of Dao County People's Court.
“This makes it harder for us to crack down on the crime,” said Qin Xuejun, director of the Public Security Bureau of Dao County.
Qin said that investigations require extensive coordination between public security and departments across regions, which takes up resources.
Che blames governments at the town and village level. “Dao County's rampant forgery problem is a reflection of poor local governance,” he told Newschina.
Covering 27 towns and 585 villages, Dao County is largely agricultural. County data shows the majority of residents do not have a college degree, and more than 90 percent of people aged 40 and above in the county's more remote villages did not attend high school.
“Most people leave to work in cities when they are young... After they come home, those who made a fortune by forging notes show off their wealth, which attracts more people to follow them... Many younger people see counterfeiting as a way to make easy money,” another Dao County police officer who served in counterfeit crackdowns told Newschina on condition of anonymity.
Che agreed, saying: “Those wealth flaunters attract more people to this industry.”
In contrast, law enforcement suffers from personnel shortages. For example, the town of Shouyan, which employs the most police officers in Dao County, has only nine officers for a population of 70,000.
Worse still, the town's two law firms and four public counsel offices do not have enough employees to service outlying villages, while the county only has four courts with 16 employees, including judges.
“Big profits, greed and lax local governance have let counterfeiting spread like a virus and form a regional crime network,” Che said. “Improving governance at the lowest levels is more important than crackdowns,” he added.
Corrupt Morals
While visiting farmers' markets in Dao County, many stall owners told our reporter that forgery is so common in the area that even they often receive fake notes.
Li Wei told Newschina that forgery has become a family business. “Some cases in recent years were crimes involving young and old members of the same family or clan,” he said.
“Chen Ping's group, for example, consists of family members, friends and neighbors who work together based on joint interests and mutual trust, and those members generally do very well in guarding their business,” he added.
According to Li, counterfeit rings in Dao County often are based in remote villages where they have strong family or clan connections. They often have multiple lookouts in the area, making police stakeouts even more difficult.
“Counterfeiting has seriously corrupted people's morals, tarnished the county's name and shaken the county's foundation of development,” Li Tianming, mayor of Dao County, said at a local government meeting in December 2020, declaring the forgery crackdowns as among the county's top priorities.
In March, Hunan provincial law enforcement issued a document instructing the Dao County government on the fight against counterfeiting. A provincial public security official who declined to give his name told Newschina that the document aims to prevent Dao County from becoming passive in its efforts once the MPS sends personnel to guide and supervise.
Dao County has kicked off a three-year anti-counterfeiting campaign. According to a county government document, every town and village official and police officer must participate in screening potential suspects and those with a criminal history of forgery. The government has even assigned an official or police officer to supervise each key suspect.
According to the document, the government aims to increase the amount of confiscated fake notes by 30 percent and reduce the number of suspects to below 3 percent of the provincial total by 2023 in the hopes it will finally remove the county from the list of key forgery regions.
“We hope that this intensive and sweeping campaign will prevent the crime from becoming regional,” Che said.
Chen Ping and Li Wei are pseudonyms