Flaw in the ointment

Tainted...a farmer sprays pesticide on crops destined for
international trade. While Chinese cuisine may enjoy a worldwide
reputation, a series of health scares has dulled the appetite
overseas for the country's products.

Tainted...a farmer sprays pesticide on crops destined for international trade. While Chinese cuisine may enjoy a worldwide reputation, a series of health scares has dulled the appetite overseas for the country's products.
Photo: AFP

June 16, 2007

Fears of fake food and medical ingredients are jeopardising China's booming exports market, write 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."