Police also confiscated more than 20,000 counterfeit bags and closed 37 illegal sites used for the production and sale of the bags, Xinhua said late on Sunday, citing a Ministry of Public Security statement.

The gang had manufactured and sold more than 960,000 such fake bags, it added.

Officials in the southern export hub of Guangdong province began uncovering the ring in January which was producing and exporting huge amounts of fake goods, the report said.

"The (public security) ministry soon exchanged the information with the U.S. Immigration and Customs Enforcement and proposed a joint investigation," it added.

Police later discovered other production sites in the eastern provinces of Fujian and Anhui, Xinhua said.

Foreign governments, including the United States, have for years urged China to take a stronger stand against violations of intellectual property rights on products ranging from medicines to software to DVD movies.

The United States in April again put China, along with Russia, on its annual list of countries with the worst records of preventing the theft of copyrighted material and other intellectual property.

China insists it is serious about tackling the problem.

The country's top official in charge of fighting copyright piracy this month slammed what he said was deliberate distortion of the problem by the Western media caused by the country's poor global image, saying important facts had been ignored.

(Reporting by Ben Blanchard; Editing by Michael Perry)

• A Permanent Economic Emergency