Sydney Morning Herald
06-15-07
Fears of fake food and medical ingredients are jeopardising China's booming
exports market
Peter Huck and Kelly Burke
It was perhaps inevitable that at some stage China would trip, given the speed at
which it hurtles towards economic supremacy. That fall, in the glare of the world's
media, has come with the humiliating revelations that fake food and medical
ingredients have been exported, triggering mass poisonings in the West. With the
Beijing Olympics just over a year away, Chinese officials have been forced into
frantic damage control.
China's crisis on the road to international respect reached a climax two weeks
ago when Zheng Xiaoyu, the former head of the country's Food and Drug
Administration and a 62-year-old Communist Party apparatchik, was sentenced
to death for accepting $832,000 to falsify documents that approved fake
medicine over a seven-year period. This dramatic measure was the climax of
weeks of unrelentingly bad press for China.
On Tuesday officials showed a horde of fake goods - including shampoo,
vitamins, tea, milk and soy sauce - to local and foreign reporters as proof they
meant business in ensuring "Made in China" does not mean fake or even lethal
products.
The Chinese Government said it had carried out more than 10 million food
market inspections in the past year alone. Problems were found in more than
360,000 businesses, with about half being shut down. Inspectors also
confiscated 16,000 tonnes of food. "Yes, we have some problems with the food
safety of Chinese products," said Li Dongsheng, the vice-minister of the State
Administration for Industry and Commerce. "However, they are not that serious."
He would say that, of course, but China will have its work cut out reassuring
consumers it is not exporting many of the serious problems - pollution,
counterfeiting and food poisoning - plaguing domestic buyers.
The counterfeit drugs from China are sophisticated, containing real medicine but
in such negligible quantities as to make it virtually useless. The World Health
Organisation estimates that one in five of the annual 1 million deaths from
malaria are a direct result of substandard or counterfeit drugs, while in Africa,
premature deaths from tuberculosis and HIV through fake medication are thought
to be in the hundreds of thousands.
In China, one of the most clear-cut cases of fake therapeutic goods recorded
under the condemned Zheng's tenure was in 2004, when at least 13 babies died
of malnutrition in Anhui province after being fed fake milk powder with no
nutritional value.
Despite clampdowns the scandals continue, most recently with fake blood
plasma found at 18 Chinese hospitals. Tellingly, in a booming economy that has
yet to transform itself into an open society, officials offered no details about the
tonnes of confiscated foodstuffs. An official with Beijing's Food Safety
Administration assured reporters that "food safety in Beijing is not a problem".
Time will tell.
While officials scramble to repair China's tarnished image, the economic fallout
for its white-hot economy, which grew 10.5 per cent last year and is the world's
fourth largest, is unsure, as the repercussions from food and drug scandals have
yet to work their way into consumer habits.
What is most evident is that China has lost face, even as the nation tries to
rebrand itself as an economic titan worthy of international respect, a
transformation Communist Party leaders hope will be celebrated at the Olympics.
"I think this has stung them," says an Iowa State University economist and China
commentator, Neil Harl. "I'm not certain that it's affected the demand for their
product. But it will."
Even as they condemned Zheng to death, officials hit back at the media while
complaining that China, too, suffered from below par imports - pistachios from
California and Evian water from France were singled out. But the US and French
products weren't fakes. The big concern is if, in a runaway economy where
thousands of small, unregulated factories produce a dizzying array of exports,
fakes are a systemic problem.
As US importers pressed China to overhaul food safety standards, scrutiny
shifted to other products. Last month Wal-Mart announced a nationwide recall of
Chinese baby bibs that contained high lead levels. Jewellery with high lead levels
was also removed from US vending machines. In Europe Chinese protein
products were tested for melamine, a toxic chemical used to inflate protein
content.
This raises the threat of a consumer backlash, especially in Western nations
where "buy local" campaigns - fuelled by fears of job losses and by efforts to
reduce carbon footprints - are challenging the basic tenets of a global economy.
Given huge foreign investment, and its status as a dominant player in world
trade, China may ride out the scandals without a trade war. But further frights
could be used by US and European Union manufacturers as a stick to beat
Chinese imports.
The key question is if China will create a system buyers can trust. "The signals
will be when they begin to implement a regulatory system that has comparable
enforcement and oversight powers to what the developed countries have," Harl
says. "We're in the early stages."
Real reform may take a while. The challenge of regulating China's vast, rapidly
transforming economy, is daunting. Media censorship and the secrecy that
hampered reactions to SARS and bird flu outbreaks are a problem. As is China's
murky psychological relationship with the outside world. "They have a complex in
my view," Harl says. "They feel that they're the little guy on the block who needs
extra understanding."
Many shoppers, especially those who have seen jobs migrate to China, will be
unsympathetic. This is particularly so in the US, the main market for Chinese
exports. The scandals may exacerbate resentment that China's undervalued
yuan - this week a congressional group demanded sanctions on undervalued
imports - has cost the US 1.8 million jobs.
For Americans the scandal began in March when tainted food killed 8500 pets,
prompting one of the nation's largest pet food recalls. The culprit was Chinese
wheat gluten. In reality it was wheat flour laced with melamine. Melamine was
also found in animal feed. "It was an outright effort to fool US buyers," says Steve
Pickman, the vice-president of corporate communications at MGP Ingredients,
America's largest wheat gluten producer. One trail led to a Chinese exporter, the
Xuzhou Anying Biologic Technology Development Company. Although the
company website cited wheat gluten among its products, Mao Lijun, the general
manager, denied exporting wheat gluten. The website also touted ESB Protein
Powder, described as "a new way to solve the problem of shortage of protein
resource". It contained melamine. The chemical was also traced to foods used in
fish farming.
Regulatory "systems were either not in place, or totally ignored and circumvented
by these Chinese suppliers", Pickman says.
Days before US Food and Drug Administration inspectors were due to visit Mao's
factory, he demolished the building. He has been arrested, with officials saying
his firm, plus another company, spiked rice and wheat exports with melamine.
The US has banned Chinese wheat gluten. But dead pets were just the tip of a
lethal iceberg. In May, after two people became ill near Chicago, frozen
"monkfish" was unmasked as puffer fish, which contains a potentially fatal toxin.
This month the agency advised consumers to discard 14 brands of Chinese
toothpaste found to contain diethylene glycol (DEG), normally used in antifreeze.
The industrial solvent was substituted for glycerine, used in food, drugs and
toothpaste.
On Wednesday, the Australian Government issued a national alert over the
DEG-contaminated toothpaste, two weeks after the Herald reported the NSW
Department of Health had ordered a regional grocery chain to remove suspicious
products from its shelves.
In much the same way the melamine was used to "pad out" the gluten in the pet
food poisoning scandal, it is believed Chinese manufacturers used the diethylene
glycol as a cheaper, albeit deadly, alternative to glycerine. That business
decision proved fatal for people in Panama, who drank cough mixture made with
the substitute chemical. US authorities have since sourced the deadly medication
to the same factory in Jiangsu province that produced the toothpaste.
To date, no one appears to have died in the US. This is not the case elsewhere.
The New York Times found the cold medicine laced with DEG killed at least 100
people in Panama. This toll is likely far higher.
Cough syrup laced with DEG had also "caused mass poisonings in Haiti,
Bangladesh, Argentina, Nigeria and twice in India", the Times said.
Dr Michael Bennish, who co-authored a 1995 British Medical Journal paper on
the Bangladesh outbreak, estimated deaths as in the "tens of thousands".
Ominously, the problem was "vastly underreported", as victims often died without
seeing doctors. American officials said China was "reluctant" to help investigate,
and expressed doubts other contaminated shipments would be traced. Fake
glycerine may also have reached Italy and Australia.
Today China is the world's major supplier of many vitamins, food flavourings and
preservatives. Last year it exported $2.5 billion of food ingredients alone, a 150
per cent rise from 2004. Yet China's food safety record is dismal, bedevilled by
corruption, fraud, pollution and the liberal use of chemical fertilisers and toxic
pesticides, even as Western consumers shift towards organic products.
"There are systemic problems with food systems in China that need attention,"
says Caroline Smith DeWaal, a director of food safety at the Centre for Science
in the Public Interest in Washington. "As the US imports products from China and
other developing countries, we have to be on high alert with respect to problems
we import with the food."
China may discover that being a player in the real world carries a downside:
consumer boycotts. "The heart of our system is consumer sovereignty," Harl
says. "The consumer is king."