Most of the production lines for pirated DVDs are smuggled into China, and once in the country are hard to find as the factories are carefully hidden from prying eyes, state media said on Wednesday.
China's failure to protect intellectual property rights for everything from movies to handbags and car parts has been a major irritant in Sino-U.S. and Sino-European relations despite Beijing's pledges to crack down.
Foreign companies say they loose billions of dollars to Chinese pirates every year.
Pirated DVDs of the latest Hollywood films are easily obtainable in Chinese cities, often costing little more than $1 a piece.
"Illegal production lines are the source of pirated discs and to seize these lines can effectively wipe out pirated discs in China," Chinese police official Xu Hu was quoted as saying by the Xinhua news agency.
But "most of the illegal production lines are smuggled from overseas and some were using edge-cutting technologies," Xu added. "The lines are clustered in the developed coastal regions of China and most are hidden in dark rooms and even caves."
Gangs control their production, the official added.
"Many gang leaders hide in other countries and gang member are strictly controlled and shun outside contacts," he said. "This has made it difficult for police to discover the lines."
The police have shut down 231 fake DVD production lines since 1996 which had the total capacity to make 220 million discs annually, Xu added.
The report did not say how many other lines the police suspect to be still operating in China.