Beijing is going after scam mills that operate out of secretive, dystopian compounds and swindle people worldwide
4 min
It’s called “pig butchering.”
Armies of scammers operating from lawless corners of Southeast Asia—often controlled by Chinese crime bosses—connect with people all over the world through online messages. They foster elaborate, sometimes romantic, relationships, and then coax their targets into making bogus investments. Over time, they make it appear that the investments are growing to get victims to send more money. Then, they disappear.
In recent months, China has unleashed its most aggressive effort to crack down on the proliferation of the scam mills, reaching beyond its territory and netting thousands of people in mass arrests. Its main target is a notorious stretch of its border with Myanmar controlled by narcotics traffickers and warlords.
For decades, frontier fiefdoms such as those in Myanmar have been havens for gambling and trafficking of everything from drugs to wildlife to people. Now, they are dens for pig-butchering operations.
The scammers operate out of secretive, dystopian compounds, many of which are run by Chinese fugitives who fled their country to places where it was easier to flout the law. They cheat Chinese citizens out of billions of dollars each year, as well as victims across the globe. The U.S. Treasury Department in September warned Americans about the scams.
In addition to remote hillside towns in Myanmar, these heavily guarded enclaves are also found in gambling hubs such as Cambodia’s Sihanoukville and Poipet. Cambodian authorities have carried out sporadic raids with China’s help, but the problem has persisted.
For Beijing, it is a significant source of embarrassment that Chinese criminals are at the centre of scams ensnaring people the world over, said Jason Tower, Myanmar country director for the United States Institute of Peace, an independent research organisation founded by the U.S. Congress that specialises in conflict mitigation.
China is “quite sensitive to the narratives that could potentially emerge,” he said. “These are largely Chinese crime groups which China, for years, did very little to check.”
The operations flourished during the Covid-19 pandemic when border trade stopped and internet use surged. They have also fuelled a human-trafficking crisis.
Many of the scammers entrapping people are themselves victims of human trafficking, lured abroad by fake job ads and held captive by withholding pay and passports. The United Nations human-rights office says more than 120,000 people may be forced to work as scammers in Myanmar, with another 100,000 in Cambodia.
One Malaysian trafficking victim told The Wall Street Journal that he was trained to spend weeks or months “fattening” his victims by gaining their trust before “butchering” them. His story was similar to those told by others lured into working in the scam mills. After responding to an ad on a job-recruitment website, he said he accepted an offer for a customer-service role in Cambodia. Once there, he was driven to a prison-like complex in Sihanoukville and forced to work as a scammer under threats of violence.
He said he had a handler who trained him, supplying him with a smartphone preloaded with fake social-media accounts, a “victim list” containing contact information of potential targets and various scripts designed to break the ice and build their trust. After several weeks, he said he convinced a driver who brought people and supplies to the compound to help him escape.
Regional migration researchers have documented trafficking from dozens of countries. Many victims come from Southeast Asia but some from as far as Brazil and Kenya.
“China is starting to signal that enough is enough,” said Inshik Sim, a Bangkok-based lead analyst for the U.N. Office on Drugs and Crime’s regional operations.
In August, China launched a “special joint operation” with three nearby countries and increased pressure on armed groups that oversee remote parts of Myanmar, convincing them to hunt down, round up and repatriate almost 5,000 Chinese nationals suspected of illicit activity.
Chinese authorities have zeroed in on several border areas that are part of Myanmar but are fully controlled by armed groups. These places have often drawn large investments from Chinese nationals—both legal and illicit. Many Chinese people, including notorious fugitives, live in these enclaves, where the Mandarin language and Chinese currency are commonplace.
The Wa Self-Administered Division, located along China’s southwestern border, is of particular interest to China, in part because Beijing has so much leverage over it. The area is home to the ethnic minority Wa people, who claim the territory as their ancestral home. China has been the group’s main benefactor for decades; historians say they helped the Chinese Communist Party flush out enemies who fled across the border in the 1950s and ’60s. The area later became a major economic gateway to resource-rich Myanmar.
Independent researchers say its de facto leadership, the United Wa State Army, commands a force of more than 20,000 people armed with modern Chinese equipment such as portable surface-to-air missiles and armored vehicles.
The area has been a major source of opium for almost two centuries, and in recent decades has become a leading producer of synthetic drugs such as methamphetamine. The U.S. Treasury blacklisted the UWSA in 2003 under the Kingpin Act, and has sanctioned dozens of people and businesses linked to the group, calling it “the largest and most powerful drug trafficking organisation in Southeast Asia.”
The UWSA and other criminal networks have increasingly turned to scamming in addition to the drug trade.
According to a 2022 report in Chinese state media, authorities blocked 2.1 million fraudulent websites and some $51.6 billion in suspicious transactions over the previous year. Beijing has warned citizens to look out for dubious rebate offers, investment schemes and unsolicited contact from anyone claiming to represent a company or law enforcement.
The first sign of a serious cleanup came in early September, when China worked with the UWSA to orchestrate two days of raids that ended with more than 1,000 suspects being marched across the border into Chinese custody. Then China upped the ante, taking aim at the group’s leadership.
On Oct. 12, China’s Ministry of Public Security said arrest warrants had been issued for two senior Wa officials accused of leading scam networks: the state’s construction minister Chen Yanban and a mayor named Xiao Yankui. Four days later, the UWSA said both had been stripped of their roles. Their whereabouts is unknown.
The same day, Chinese authorities said they had transferred 2,349 “telecommunication fraud” suspects from Myanmar two days prior—the single largest such handover. China says 4,666 suspects have been repatriated from Myanmar since the crackdown began earlier this year.
“This is by any measure a major operation, which speaks to the impact on China and Chinese citizens, and the seriousness with which Beijing is approaching this,” said Richard Horsey, senior adviser on Myanmar for the International Crisis Group, a Brussels-based think tank specialis ing in conflict prevention.
While China may be turning up the heat on cybercriminals along its border, experts say scamming is so lucrative that the ringleaders are likely to simply look for more fertile ground—areas in weak states where law enforcement is lax.
“These groups are not going to go away easily,” said Tower, of the U.S. Institute of Peace. “They’re sitting on a massive source of capital and there are many fragile places in the world that they’ll be able to exploit.”
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Multinationals like Starbucks and Marriott are taking a hard look at their Chinese operations—and tempering their outlooks.
4 min
For years, global companies showcased their Chinese operations as a source of robust growth. A burgeoning middle class, a stream of people moving to cities, and the creation of new services to cater to them—along with the promise of the further opening of the world’s second-largest economy—drew companies eager to tap into the action.
Then Covid hit, isolating China from much of the world. Chinese leader Xi Jinping tightened control of the economy, and U.S.-China relations hit a nadir. After decades of rapid growth, China’s economy is stuck in a rut, with increasing concerns about what will drive the next phase of its growth.
Though Chinese officials have acknowledged the sputtering economy, they have been reluctant to take more than incremental steps to reverse the trend. Making matters worse, government crackdowns on internet companies and measures to burst the country’s property bubble left households and businesses scarred.
Now, multinational companies are taking a hard look at their Chinese operations and tempering their outlooks. Marriott International narrowed its global revenue per available room growth rate to 3% to 4%, citing continued weakness in China and expectations that demand could weaken further in the third quarter. Paris-based Kering , home to brands Gucci and Saint Laurent, posted a 22% decline in sales in the Asia-Pacific region, excluding Japan, in the first half amid weaker demand in Greater China, which includes Hong Kong and Macau.
Pricing pressure and deflation were common themes in quarterly results. Starbucks , which helped build a coffee culture in China over the past 25 years, described it as one of its most notable international challenges as it posted a 14% decline in sales from that business. As Chinese consumers reconsidered whether to spend money on Starbucks lattes, competitors such as Luckin Coffee increased pressure on the Seattle company. Starbucks executives said in their quarterly earnings call that “unprecedented store expansion” by rivals and a price war hurt profits and caused “significant disruptions” to the operating environment.
Executive anxiety extends beyond consumer companies. Elevator maker Otis Worldwide saw new-equipment orders in China fall by double digits in the second quarter, forcing it to cut its outlook for growth out of Asia. CEO Judy Marks told analysts on a quarterly earnings call that prices in China were down roughly 10% year over year, and she doesn’t see the pricing pressure abating. The company is turning to productivity improvements and cost cutting to blunt the hit.
Add in the uncertainty created by deteriorating U.S.-China relations, and many investors are steering clear. The iShares MSCI China exchange-traded fund has lost half its value since March 2021. Recovery attempts have been short-lived. undefined undefined And now some of those concerns are creeping into the U.S. market. “A decade ago China exposure [for a global company] was a way to add revenue growth to our portfolio,” says Margaret Vitrano, co-manager of large-cap growth strategies at ClearBridge Investments in New York. Today, she notes, “we now want to manage the risk of the China exposure.”
Vitrano expects improvement in 2025, but cautions it will be slow. Uncertainty over who will win the U.S. presidential election and the prospect of higher tariffs pose additional risks for global companies.
For now, China is inching along at roughly 5% economic growth—down from a peak of 14% in 2007 and an average of about 8% in the 10 years before the pandemic. Chinese consumers hit by job losses and continued declines in property values are rethinking spending habits. Businesses worried about policy uncertainty are reluctant to invest and hire.
The trouble goes beyond frugal consumers. Xi is changing the economy’s growth model, relying less on the infrastructure and real estate market that fueled earlier growth. That means investing aggressively in manufacturing and exports as China looks to become more self-reliant and guard against geopolitical tensions.
The shift is hurting western multinationals, with deflationary forces amid burgeoning production capacity. “We have seen the investment community mark down expectations for these companies because they will have to change tack with lower-cost products and services,” says Joseph Quinlan, head of market strategy for the chief investment office at Merrill and Bank of America Private Bank.
Another challenge for multinationals outside of China is stiffened competition as Chinese companies innovate and expand—often with the backing of the government. Local rivals are upping the ante across sectors by building on their knowledge of local consumer preferences and the ability to produce higher-quality products.
Some global multinationals are having a hard time keeping up with homegrown innovation. Auto makers including General Motors have seen sales tumble and struggled to turn profitable as Chinese car shoppers increasingly opt for electric vehicles from BYD or NIO that are similar in price to internal-combustion-engine cars from foreign auto makers.
“China’s electric-vehicle makers have by leaps and bounds surpassed the capabilities of foreign brands who have a tie to the profit pool of internal combustible engines that they don’t want to disrupt,” says Christine Phillpotts, a fund manager for Ariel Investments’ emerging markets strategies.
Chinese companies are often faster than global rivals to market with new products or tweaks. “The cycle can be half of what it is for a global multinational with subsidiaries that need to check with headquarters, do an analysis, and then refresh,” Phillpotts says.
For many companies and investors, next year remains a question mark. Ashland CEO Guillermo Novo said in an August call with analysts that the chemical company was seeing a “big change” in China, with activity slowing and competition on pricing becoming more aggressive. The company, he said, was still trying to grasp the repercussions as it has created uncertainty in its 2025 outlook.
Few companies are giving up. Executives at big global consumer and retail companies show no signs of reducing investment, with most still describing China as a long-term growth market, says Dana Telsey, CEO of Telsey Advisory Group.
Starbucks executives described the long-term opportunity as “significant,” with higher growth and margin opportunities in the future as China’s population continues to move from rural to suburban areas. But they also noted that their approach is evolving and they are in the early stages of exploring strategic partnerships.
Walmart sold its stake in August in Chinese e-commerce giant JD.com for $3.6 billion after an eight-year noncompete agreement expired. Analysts expect it to pump the money into its own Sam’s Club and Walmart China operation, which have benefited from the trend toward trading down in China.
“The story isn’t over for the global companies,” Phillpotts says. “It just means the effort and investment will be greater to compete.”
Corrections & Amplifications
Joseph Quinlan is head of market strategy for the chief investment office at Merrill and Bank of America Private Bank. An earlier version of this article incorrectly used his old title.
