Tuesday, September 16, 2008

What The Baby Milk Scandal Says About China

The escalating tainted baby milk scandal is more than a tragedy for China.

Two babies have died, and more than 1,250 have been sickened with kidney stones after drinking formula that had been contaminated with melamine, a chemical banned in the food industry but added to raw milk to boost the appearance of the protein content, Chinese health officials say. Many of the sick infants have mild symptoms, but 53 are said to be in serious condition.

In all, health officials say, 10,000 babies may have consumed the formula, which was distributed mainly in three provinces: Hebei, Jiangsu and Gansu, where the two deaths occurred. A small quantity was also exported to Taiwan.

This is not China's first baby formula scandal in recent years. At least 13 babies in Anhui province died in 2004 after consuming fake formula.

This latest scandal is how long it took the affair to come to light--and the roundabout route by which it did so. It suggests that product safety reforms put in place following a series of scares last year involving toys, toothpaste, food and other dangerous exports took shallow root.

The dairy that sold the formula, Sanlu Group, one of China's largest, received complaints about the tainted milk powder in March (kidney stones are rare in infants) and had confirmed the presence of melamine in some batches early last month. It was the same chemical found in contaminated pet-food exports last year that caused scores of U.S. animals to die. But a product recall for the baby formula didn't start until last week.

Fonterra, a New Zealand farm cooperative that owns a 43% stake in Sanlu Group, says it recommended a recall on Aug. 2. However, neither company executives nor provincial health authorities in Hebei, where Sanlu is headquartered, took any action.

On Monday, Helen Clark, New Zealand's prime minister, said it wasn't until after Fonterra alerted her government, and it in turn contacted Beijing through diplomatic channels, that ministry officials forced Sanlu's hand. "I think the first inclination was to try to put a towel over it and deal with it without an official recall," Clark said on TV New Zealand.

Since the central government stepped in, 19 people have been detained for questioning and four milk brokers have been charged with producing and selling toxic and hazardous food. None are company employees, but Sanlu Group's chairwoman and general manager Tian Wenhua has been fired. She also lost a Party committee post she held in Hebei.

Pointing the finger of blame at milk brokers, who buy from family farmers and sell to agricompanies like Sanlu, underlines a more systemic problem. Latest reports speak of tainted formula being produced by at least 22 companies across China.

A tainted food scare coming just days ahead of the opening of the Beijing Olympic games on Aug. 8, would have been a PR nightmare for the Chinese authorities--and the central government's Propaganda Department had given Chinese media guidance not to report on food safety among several issues for the duration of the game. But the appearance of a cover-up at the local and provincial level now emerging will undermine the extensive work done by central government to clean up China's reputation on product safety.

This has included global recalls of Chinese products, steps to improve oversight and inspection of production facilities and some exemplary punishments. Sanlu Group, as one of the biggest companies in its industry, was expected to act as a role model. It has been ordered to stop production and to destroy more than 10,000 tons of baby formula seized by police in the investigation, according to state media.

More exemplary punishments are likely to come. Sound familiar?

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