I just think it's all a case of we are all a soft touch, because we can't speak Chinese very well or not at all and we are always nice and friendly.
This is viewed in a young persons mind as an opportunity to take advantage of the situation.
I will always remember my weak and soft teachers at school and how we would take advantage of their weaknesses if we could.It's human nature.
Sure they are all capable of taking a chance - it's their way of seeing how smart you are.
Ask any teacher in the west about cheating and sure enough they have all experienced some form of cheating - how often we read about the exam papers being stolen or copied and university assignments being plagiarized - it happens all the time.
It really depends on how you deal with it that determines their moral lesson.
You can ignore it but it won't go away and they will lose respect for you and everything you do - they will talk and boast about how stupid you are and thereafter the epidemic will flourish.
I think you should take action from the outset - or at least make them aware that you know what they are up to - but of course be reasonable in your assumptions and explanations.
I think always link it with a story about consequences in life and try to draw analogies drawing for example in a friendship or relationship for example if your father or mother cheated or lied or your best friend cheated - how would you feel.
We are after all teachers and we should educate them in these very important life skills - they are after all only young kids on a journey through life with you as their guide.

I have been a teacher in China for almost two years and I have taught big and small classes and old, young and adult students and teachers too
Cheating is a problem, sure, but you will never stop it altogether. Use your imagination in this situation - it often has a very positive and encouraging end result.

Don't lose your cool and pull your hair out - just deal with it in a calm and collected manner.

I hope it helps.
Kevin