BEIJING, CHINA: Chinese counterfeiters who churn out quality copies of everything from CDs to condoms have now turned their hands to the ultimate fake: sham banknotes.

High-quality counterfeit renminbi (the people's money) have turned up in about 20 Chinese provinces and cities.

The authorities and the media blame Taiwanese syndicates and mainland rackets for producing the notes.

Peddlers openly tout fake 100-yuan (US$14.6) notes for 10-20 genuine yuan apiece along the streets, in roadside advertisements and on the Internet, reports say. The counterfeit bills have even hit Hong Kong's shops and Macau's casinos.

Most are imitations of the highest-denomination 100-yuan (a shorter name for the renminbi) bill, and bear serial numbers beginning with 'HD90'.

"Guaranteed legal tender for payments and gambling, but not bank deposits," says one ad on the popular Baidu Web portal. It offers a money-back guarantee if its 'product' fails to fool standard authenticating machines.

Many Chinese find them irresistible.

In one case, Mo Qinsong, a 34-year- old farmer from Guangzhou, was jailed for 10 months and fined 15,000 yuan on Jan 13 for using 55 fake 100-yuan notes at a Shanghai jewellery shop. He had bought the notes for 10 yuan each.

Some of the bogus yuan notes have even found their way to Singapore.

A Singaporean businessman nearly got into trouble in Guangdong this month after using a fake 100-yuan bill. He said he obtained it from a money changer in Serangoon Road and did not know it was counterfeit, The New Paper reported.

While the problem of counterfeit yuan is not new, more fake money has poured into the streets since China signed currency settlement or swap agreements with South Korea, Russia, Vietnam, Myanmar and a few other countries late last year.

Analysts say the pacts are the first major steps in the renminbi becoming an international currency like the US dollar.

The circulation of renminbi has also increased as the number of Chinese travelling abroad grows.

Last Oct, Taiwan's police cracked a counterfeiting ring and confiscated fake yuan notes with a face value of 130 million yuan, said to be the largest bust of fake renminbi in the island.

The group had been 'in business' since early last year, and police feared that large quantities of the notes had already been smuggled to the mainland.

The China Times, a Chinese-language daily in Taiwan, said this month that counterfeit notes with a combined face value of up to 10 billion yuan were likely to be circulating.

Even the People's Bank of China has acknowledged that some of the fakes could fool 'low-quality cash detectors'. It has ordered banks nationwide to upgrade their detectors. It also provided tips on how to identify the fakes, for example, the metallic strip in real notes is a solid line while it is broken in the fakes. Also, the watermarks on fake bills are not as clear as they are on real notes.

Alarmed by the rising tide of fakes, the ministry of public security last week started offering rewards of up to 300,000 yuan to people who report anyone who produces, sells or uses fakes.

Under Chinese law, people who possess or use counterfeit currency can face up to 10 years in prison or even death.

The fakes are unlikely to dim the yuan's prospects of becoming an international currency though, experts say.

"Given the rising value of the yuan, China's growing economy and the potential of China's border trade with its 14 neighbours, counterfeit would only be a short-term distraction," Professor Wen Guanzhong, an economist with Trinity College in Connecticut, told Duowei News, a Chinese-language newspaper based in New York.

Still, it would not hurt if the Chinese authorities improved the security features of the people's money, he added. (By LEE SEOK HWAI/ The Straits Times/ ANN)