The deputy director of China's National Narcotics Control Commission, Yang Fengrui, announced the campaign to urge people to report drug-related activities in return for rewards as high as $36,000.
Calling the country's drug problem "grave", Mr. Yang said the so-called "people's war" will also step up efforts to regulate the manufacture, transport and sale of chemicals used to make narcotics such as cocaine, heroin, and crystal methamphetamine - also known as "ice."
"At present, the legal office of China's cabinet is formulating a regulation on the control of precursor chemicals, and that law is expected to come out soon," Yang Fengrui said.
U.S. drug enforcement officials have long regarded China as a major source of precursor chemicals and a transit point for Southeast Asian heroin.
Much of the trafficking is in southern China, near the so-called "Golden Triangle" opium-producing region where Burma, Thailand, and Laos meet, as well as in the west, near Afghanistan.
China has one million registered drug addicts, although experts say the real number of users might be seven times as many. The drug of choice for many Chinese addicts is heroin.
Political Science Professor Dali Yang at the University of Chicago has written extensively on the rising use of drugs in China. He points to the emergence of a more prosperous and open society as one factor.
"With the changing society, the problem has been the increasing use of heroin, particularly by artists and certain other groups," said Dali Yang. "Also, this actually reflects some concerns about the moral vacuum. Some of the new rich have also gotten into drugs."
The government says it has made strides in combating drugs, pointing to the 67,000 drug arrests last year and tons of narcotics seized. But officials admit the problem of drug abuse "has never been resolved."
Labor camps remain the primary means of dealing with drug offenders, but the Chinese government says it is exploring other ways to rehabilitate addicts.