He cited an example of a 20-member gang in Hunan province headed by 30-year-old Chen Guiming. The gang had monopolized the local seafood market since 2007, bullied vendors and seriously injured one. The gang made 6.4 million yuan ($984,000) through the market.

Hunan police arrested the gang in March 2010, and Chen was later sentenced to 19 years in prison by the Intermediate Court of Changsha, the provincial capital, for gang-related crime and causing intentional injury. The other 19 members of the gang received jail terms ranging from one to 15 years.

"Most of the gang were jobless and poorly educated young people, and some of them had been sentenced to jail before," he said.

Liao acknowledged that the police are fighting an uphill battle against gangs.

"Many people dare not contact the police or take the witness stand in court for fear of revenge," he said.

Some law enforcement officers, as well as tax, industry and commerce officials, have colluded with gangs, he said.

However, the situation is under police control, he said. A gang, on average, has 15 members and is usually smashed by the police within three years of forming, Liao said.

Police in 2010 cracked 440 criminal organizations and 4,000 gangs involved in 37,000 criminal cases, detaining 28,000 suspects, according to statistics from the Ministry of Public Security.

Assets involved in gang crimes were valued at 2.74 billion yuan in 2010.