The State Council of China announced Oct. 8 that it would be increasing its support for the construction of the Kashgar and Korgas economic development zones in the country's western Xinjiang Autonomous Region. Qualified businesses will receive subsidies, tax reductions and other discounts from 2011 to 2015 to develop the economic zones. Infrastructure projects, including railways to Pakistan and Uzbekistan via Kyrgyzstan, also will receive increased investment. The funding of economic zones and transportation networks is not a new trend in China, and the central government has put significant effort and capital into developing both in the west for more than 25 years. Heavy and light railroad lines are currently being built, and international highways connecting Xinjiang with Central Asia, Turkey and Europe are in the planning stage or under construction. The Xinjiang Foreign Trade Office reported that the total value of imports and exports was expected to top 63 billion yuan ($10 billion) in 2011, a 50 percent increase from 2010. These economic zones will help improve economic and political ties between China, Central and Southern Asia, and Eastern Europe. However, while the improved trade and transportation networks will facilitate legal, taxable trade, it also will facilitate the trade of gray market goods (legal goods traded in a way that escapes taxes and government oversight) and illegal products, which collectively make up the shadow economy. China's massive population recently has seen an increase in its disposable income, and China's consumer market is growing accordingly, with businesses both legitimate and illicit attempting to grab market share. Even in the case of an economic downturn, once transportation networks are in place the shadow economy grows because more people are forced outside the legitimate economy to find products they need. China also will continue to be an export economy, which means illicit and gray goods will flow out of the country as well. A new commodities trading hub being built in Urumqi will allow counterfeiters, smugglers and criminal organizations to mix with legitimate commodity traders, build networks, and control the flow of illicit goods in and out of China. Shadow economies work on the same basic economic principle of supply and demand as legitimate ones, and smuggling is simply a tactic by which suppliers of illicit goods work to meet consumers' demands outside of government control. Though individuals or small groups sneaking across holes in border security do a substantial amount of smuggling, most goes through official overland border crossings or official ports of call. Through these hubs it is easier to move large loads, and the volume of cargo passing through major border crossings makes it less probable that a shipment of illicit goods will be seized. Even with top-notch technology and large numbers of customs agents, which most border crossings lack, it would be extremely difficult to stop or even slow most illicit products from making it through. Corruption is also a major problem at border crossings and ports, which not only increases the difficulty of interdiction but also negatively affects border security — and therefore national security. Smuggling operations around the world are generally extremely profitable, which naturally attracts the attention of organized crime. Once these organizations see profits, they begin to solidify their control and expand their reach. As different regions are connected to one another, it becomes more likely that a major criminal organization will take over entire networks, from supply to market. In some cases these criminal organizations can become so powerful that they rival state governments for power — or become the de facto government. This has repercussions both for a country's security and its economy. For China, this dynamic causes particular concern. Xinjiang is already difficult to control for the central authority via normal governing methods, and part of the reason for developing this region is to better integrate the west into China. However, the simultaneous development of a large, illicit economy allows substantial segments of the Uighur population to exist outside the legitimate economy, and therefore be less reliant on the state for survival. In China, corrupt officials, Chinese organized crime groups and locals, including the Uighur and Han in Xinjiang, are involved in the smuggling of illicit goods. In Central Asia, smuggling is handled by organized criminal organizations both local and international (especially Russian), local governments and possibly militant networks. Iranian organized crime families use routes such as the Balkan route to move illicit goods to Turkey, where Turkish criminal groups move the product through the country. Bulgarian and Albanian organized crime groups, among others, then smuggle the goods to southern European ports, where legitimate transport routes and methods are used to distribute the goods throughout Europe. It is no surprise that, looking at the global context of illegal smuggling, organized crime groups are increasing their control of what is known as the Balkan route, connecting Central Asia to Europe. Countless other criminals and gangs in the region make their living off illicit trade moving to and from China. As these development projects move forward, the criminal groups in control of the routes will attempt to unify operations while new groups form. Some groups may come to dominate, just as large corporations move into a region and co-opt or destroy the competition. China has typically dealt with external threats by closing its borders, turning inward and meting out harsh punishments for any crimes considered harmful to the state. If China wants to continue its current rate of economic growth, it will not have the option to completely close the borders and go inward as it did in 1949. Any attempt to restrict illicit trade also will negatively affect legitimate trade by slicing away at already low profit margins, which is not something the central government wants. It is unclear how well China or the other involved countries understand these dynamics. Most countries, including China, direct their efforts at the supply side and do not focus on the demand. At some point we expect to see China increase its involvement in counter-smuggling operations in the region and inside China, although once the flow of illicit goods has started, and a market and demand are established, it is almost impossible to stop.