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One manufacturer she knows invested $2.5 million to start another legitimate business elsewhere, but recently quit and returned disappointed, she reports, because the profits could never match counterfeit. Still, though, she hopes the industry will make a shift: We locals hope we can work together to build up a real factory someday. Patricia Chan in Hong Kong and Alain Lallemand in Brussels contributed to this report.

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It wasnt until the 1600s that Europeans began hand-rolling tobacco into cigarettes