YUNXIAO, China—On first approach, Yunxiao seems like any other Chinese backwater caught in an uneasy industrial transition. Faded advertisements line the downtown streets, where motorcyclists wearing bamboo-frond hats vie for paying passengers in a riot of honking. A cheerful red banner in the city center exhorts citizens to develop the local economy. The message seems ironic. After all, since the 1990s, Yunxiao has sprouted its own league of millionaires, famous throughout China.
But you won’t find their activity downtown.
Ringed by thickly forested mountains, illicit cigarette factories dot the countryside, carved deeply into caves, high into the hills, and even buried beneath the earth. By one tally, some 200 operations are hidden in Yunxiao, a southwestern Fujian county about twice the area of New York City. Over the last 10 years, production of counterfeit cigarettes has soared in China, jumping eightfold since 1997 to an unprecedented 400 billion cigarettes a year—enough to supply every U.S. smoker with 460 packs a year. Once famed for its bright yellow loquat fruit, Yunxiao is the trade’s heartland, the source of half of China’s counterfeit production.
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