China, Criminal Networks, and Gray Zone Competition

Abstract

Strategic competition in the Pacific has reinforced the value of state-condoned illicit disruptors such as criminal networks as strategically useful and plausibly deniable tools of the state. For criminal actors, the benefits are access and influence. China is utilizing state-condoned illicit disruptors as a form of gray zone activity in the Pacific.

China’s engagement with illicit actors in the Indo-Pacific is best understood through the lens of state-condoned illicit disruptors: criminal figures and networks whose activities are tolerated, protected, or selectively constrained when they serve wider state objectives. This does not require a simple command relationship between the Chinese state and organized crime. Nor does it mean that every Chinese criminal actor abroad is an agent of Beijing. The more important point is that certain illicit actors can become strategically useful when they extend influence, cultivate local elites, generate deniable economic leverage, support patriotic narratives, and operate in spaces where formal state power would attract resistance.

States have always used intermediaries to reach places, communities, and markets that formal power could not easily reach. Empires relied on chartered companies, merchant houses, privateers, militias, and local brokers to move goods, gather intelligence, enforce influence, and absorb risk. The Indo-Pacific has its own long history of such arrangements, from trading networks and clan associations to commercial patrons and maritime intermediaries. What is different today is the setting. Strategic competition now takes place in an environment where overt coercion is costly, reputational risk matters, and small states are alert to the dangers of formal dependency. In this context, illicit actors can perform work that is useful to states precisely because they are not officially part of the state. They can move money, cultivate politicians, pressure communities, test regulatory boundaries, and establish durable local access without triggering the same response as a warship, intelligence officer, or state-owned enterprise.

The strategic value of such actors is greatest in contested spaces where sovereignty is real but state capacity is thin. The Pacific Islands provide particularly fertile ground for this model. Vast maritime spaces, limited surveillance capacity, small political economies, and heavy reliance on foreign capital combine to create environments where illicit and licit activity can easily converge. In such contexts, transnational criminal networks linked to Chinese nationals or businesses have found opportunities in drug trafficking, illegal fishing, cyber fraud, money laundering, logging, mining, and real estate. These activities are not merely criminal; they intersect with strategic competition by reshaping governance incentives and altering the regional balance of influence.

This essay argues that China benefits from state-condoned illicit disruptors as part of its broader strategy in the Pacific Islands. The term is useful because it captures a relationship of tolerance, utility, and selective enforcement without assuming that Beijing commands every criminal network. When they are useful, they may be left alone, granted access, publicly embraced by local partners, or allowed to wrap themselves in patriotic language. When they become embarrassing, uncontrollable, or diplomatically costly, they can be disowned or punished.

The 2017 deportation of Chinese nationals from Fiji also shows how law enforcement cooperation can carry strategic effects. 77 Chinese citizens accused of online and telecom fraud were removed from Fiji in close coordination with Chinese authorities. The episode was conducted through Fijian processes, but the imagery of hooded and restrained suspects arriving in China signaled something larger than criminal justice. It projected Chinese enforcement reach into the Pacific and demonstrated how Beijing can shape policing cooperation in small states. Such operations may address real criminal activity, but they can also normalize Chinese security presence, deepen institutional relationships, and create precedents for future cooperation. For Pacific governments, the problem is not cooperation itself. The problem is cooperation that develops without strong safeguards, transparency, and respect for due process.

The relationship is therefore conditional rather than contractual, but it can still generate strategic effects. In the Pacific Islands, where rising transnational organized crime, limited enforcement capacity, insider threats, uneven governance, and intensifying strategic competition overlap, these actors represent a hybrid threat. They can distort governance, weaken sovereignty, and expand Beijing-aligned influence while preserving plausible deniability for the Chinese state and producing commercial benefit and political currency for the actors themselves.

In the Pacific, two criminal actors illustrate the pattern: Zhao Fugang – linked to organized crime and political influence – highlights how illicit networks can intersect with strategic interests. Wan Kuok-Koi, also known as “Broken Tooth,” associated with organized crime activities across Asia-Pacific and Pacific Islands jurisdictions, demonstrates how criminal actors can operate across borders in ways that may carry geopolitical implications.

Zhao Fugang offers a Pacific example of the state-condoned illicit disruptor dynamic, a Fiji-based businessman, hotelier, and naturalized Fijian citizen who Australian law enforcement and intelligence agencies identified as a significant organized-crime target, while also describing him as a politically connected figure linked to Chinese Communist Party influence activity in the Pacific. The strategic significance of Zhao lies not in proving formal direction by Beijing, but in the way his commercial, political, and diaspora networks appear to have operated at the intersection of influence, access, and impunity. Public reporting described Zhao cultivating relationships with senior Fijian political and policing figures, hosting Chinese diplomats and local elites at his Yue Lai Hotel in Suva, Fiji’s capital, and remaining socially and commercially embedded despite warnings reportedly passed to Fijian authorities. In 2021 Zhao participated in a “security exchange” symposium with the then Fijian Police Commissioner Brigadier General Sitiveni Qiliho. In 2024 it was alleged that Fiji’s Counter Narcotics Bureau had been infiltrated by Zhao’s network. The Counter Narcotics Bureau has since been disbanded following several members’ alleged involvement with drug trafficking.

Zhao’s value is that he represents the kind of high-risk intermediary who can move money, cultivate elites, open doors, normalize Chinese influence, and generate dependency while remaining formally outside the state. Zhao’s deep integration into Fiji’s commercial and political landscape illustrated how high-risk actors can become insulated through proximity to power. For Beijing, such actors are useful because they extend influence through business, diaspora networks, media, property, and social access without requiring overt state action. For the actor, the benefit is protection, prestige, and insulation: proximity to Chinese diplomatic narratives and local political elites can convert suspicion into ambiguity and vulnerability into leverage. The reported purchase of Fijian property from Zhao by Tuvalu illustrates how exposure around one politically connected figure can propagate across the Pacific region. Zhao is best understood as a state-useful illicit disruptor: an intermediary whose alleged criminality, business reach, and political access create precisely the gray zone conditions in which state objectives can be advanced through deniable, commercially embedded, and locally networked actors.

Wan Kuok Koi illustrates how criminal entrepreneurs can reposition themselves as patriotic auxiliaries of Chinese influence abroad. Once identified as a senior figure in Macau’s 14K triad, Wan was imprisoned in Macau and released in 2012. His re-emergence was not simply a return to the casino and junket world. He reinvented himself as a businessman, cultural leader, and patriot, using ostensibly civic, commercial, and “patriotic” platforms to launder criminal pedigree into political access and legitimacy. The most important of these platforms was the World Hongmen History and Culture Association. Through this organization and associated ventures, Wan presented himself as a defender of Chinese tradition, a supporter of the Belt and Road Initiative (BRI), a promoter of overseas Chinese unity, and an advocate for the protection of Chinese nationals abroad. The U.S. Treasury sanctioned Wan in 2020, alleging that the World Hongmen History and Culture Association functioned as a front for 14K triad activity and that Wan used it to advance business and criminal interests under the banner of Chinese cultural and patriotic work. Beijing denied claims that Wan held a formal Chinese political advisory role. That denial matters, but it does not settle the strategic question. The key issue is not whether Wan was formally directed by the party-state. It is that his patriotic self-presentation created political cover, status and access in places where criminal capital and Chinese strategic narratives could travel together.

The strategic value of criminal actors such as Zhao and Wan is that they blend four functions. First, they bring capital and risk tolerance. Criminal entrepreneurs can invest where reputable firms hesitate, especially in gambling, real estate, cryptocurrency, security services, logistics, and opaque development zones. Second, they bring access to networks that formal state actors may not control: diaspora associations, casino circuits, informal banking systems, brokers, local fixers, and officials willing to trade influence for money. Third, they carry a patriotic narrative. For example, by invoking Hongmen history, Chinese cultural revival, protection of overseas Chinese, and Belt and Road development, Wan can translate private profit into the language of national service. Fourth, they offer deniability. If projects fail, attract scandal, or become associated with fraud, trafficking, intimidation, or corruption, the Chinese state can distance itself while still having benefited from the access, influence, and dependency that the networks created.

The arrangement carries risks for Beijing. Criminal actors are not disciplined instruments. They seek profit, status, protection, and survival. They can embarrass the state, harm Chinese nationals, provoke sanctions, or generate resentment in host countries. This is why state-condoned does not mean state-controlled. It means tolerated within limits. The Chinese party-state may benefit from these actors while retaining the option to deny, abandon, or punish them. That flexibility is central to gray zone practice. It allows Beijing to harvest advantages from informal networks without accepting responsibility for their conduct.

In Southeast Asia and the Pacific, Wan’s network and Zhao’s activities show how criminal capital, influence operations, and strategic competition can converge. In Cambodia, Malaysia, and Myanmar, his Hongmen and Dongmei-linked activities have been associated in public reporting with casinos, cryptocurrency, real estate, security services, and BRI-branded development projects. His proposed Myawaddy development zone in Myanmar was marketed under the Belt and Road banner despite concerns that its core business model centered on illegal gambling. In the Pacific, the Palau China Hung-Mun Cultural Association was among the entities sanctioned by the U.S. Treasury, while investigative reporting has linked Wan-associated ventures and illegal online gambling operations to broader Chinese influence efforts in a strategically significant Pacific state that has close ties with the United States under the Compact of Free Association, is one of three remaining Pacific states to recognize Taiwan, and in 2026 will host the Pacific Islands Forum Leaders Summit.

This does not make Wan a formal state agent. Rather, he is best understood as a state-tolerated or state-useful illicit disruptor: a figure whose patriotism is performative, transactional, and strategically convenient. His value lies in the ability of criminal networks to insert themselves into sovereignty-sensitive spaces while claiming to defend Chinese interests, support national rejuvenation, and extend Beijing-aligned influence through non-state means. This is the essence of state-condoned criminal behavior: not direct command-and-control, but a permissive ecosystem in which politically useful illicit actors advance strategic narratives, cultivate elites, generate dependency, and provide deniability.

Conclusion

In this context, China has increasingly benefited from what can be described as state-condoned illicit disruptors: criminal actors and networks whose activities are tolerated, shielded, or selectively enabled when they align with Beijing’s strategic objectives, and constrained when they become politically inconvenient. These practices sit comfortably within the logic of gray zone competition, operating below the threshold of armed conflict while producing cumulative strategic effects. Rather than exercising direct command over illicit actors, Beijing derives strategic advantages through conditional tolerance of criminal networks whose activities align with Chinese geopolitical objectives. What makes these cases relevant to Pacific security is not the presence of a single individual, but the way criminal pedigree can be laundered into influence infrastructure. Associations and business platforms provide a vehicle through which finance, intimidation, and access can circulate while remaining formally detached from the state.

The strategic utility of criminal activity in the Pacific lies in its ability to erode sovereignty quietly. Illegal fishing fleets deplete local resources while maintaining constant maritime presence, familiarizing crews with patrol patterns and port infrastructure. Criminal logistics networks involved in narcotics trafficking double as intelligence-gathering mechanisms, mapping customs processes, political vulnerabilities, and enforcement gaps. Financial crimes and underground banking systems embed dependency by funneling illicit capital into construction, hospitality, and land markets that are difficult for small states to regulate effectively. Over time, the cumulative effect is institutional strain, social harm, and diminished autonomy, all without the overt use of force.

For Beijing, these actors can be useful because they extend reach, create leverage, and test boundaries while remaining deniable. For the actors themselves, the reward is protection, legitimacy, access, and profit. For Pacific states, the danger is gradual: not open coercion, but the quiet erosion of sovereignty through corrupted decisions, compromised institutions, and strategic ambiguity. That is why state-condoned illicit disruptors should be understood as a hybrid threat and a core feature of gray zone activity in the Pacific.  The challenge for Pacific governments and partners is to create an architecture or disruption ecosystem that recognizes the need to operate across illicit and legitimate spaces by including law enforcement, national security agencies, and foreign affairs – alongside a legislative response – in order to identify, map, address, and mitigate against the state-condoned illicit disrupter threat.