Reposted from the International Herald Tribune
Mark McDonald | June 21, 2012 | Int”l Herald Tribune
HONG KONG — There’s mercury in the baby formula. Cabbages are sprayed with formaldehyde. Gelatin capsules for pills, tens of millions of them, are laced with chromium. Used cooking oil is scooped out of gutters for recycling, right along with the sewage.
Accounts of dubious or unsafe food in China are as mesmerizing as they are disturbing — “artificial green peas,” grilled kebabs made from cat meat, contaminated chives, chlorine showing up in soft drinks.
There have been stories of imitation soy sauce made from hair clippings, ink and paraffin being used to dress up cheap noodles, and pork buns so loaded with bacteria that they glow in the dark.
A new investigation by the Chinese magazine Caixin has found that “these publicized food safety scandals represent only a fraction of unsafe food production practices. Hundreds of chemical food additives are pumped into products that Chinese people consume every day.”
The official Chinese news agency Xinhua reported Wednesday that Chinese authorities have discovered 15,000 cases of substandard food so far this year while shutting down 5,700 unlicensed food businesses.
Things are so bad that a new iPhone app was recently launched to track food scandals nationwide. The app, which sends out daily updates on the latest outrages, was reportedly downloaded more than 200,000 times in the first week.
In 2008, infant formula and other milk products were found to becontaminated with melamine, an industrial chemical used to make fertilizer and plastic pipe. Six children died and some 300,000 fell sick.
The melamine scandal caused a nationwide panic among parents of young children, and there was a worldwide recall of Chinese products ranging from biscuits to baby formula. Two Chinese milk producers were executedfor selling more than 3 million pounds of contaminated milk powder.
There were unsettling echoes of that scandal last week when China’s largest dairy, Inner Mongolia Yili Industrial Group, found elevated levels of mercury in its infant formula and was forced to recall six months’ worth of production. Yili was one of the dairies involved in the 2008 scandal.
Milk and dairy safety has become such a sensitive topic in China that some Internet searches about the scandal were reportedly blocked by government censors.
Another major milk producer, China Mengniu Dairy, had to destroy large batches of milk in December when government spot checks turned up evidence of aflatoxin, a cancer-causing fungus. Within a day of the news, my colleague Edward Wong reported, people on the Internet “had posted or copied posts on the bad milk nearly four million times.”
The string of food-safety scandals, especially in the dairy sector, has led to falling share prices — and significant buying opportunities for foreign investors, according to a Reuters report published in the International Herald Tribune. The Danish-Swedish dairy group Arla, for example, said last week that it plans to buy a 6 percent stake in Mengniu.
China is already the world’s largest formula market, Reuters reported, noting that the country is “expected to overtake the United States as the largest dairy market by 2020.” That timeline could be hastened by a possible relaxation of China’s so-called one-child policy in 2015.
From the Reuters report:
“To be a minority shareholder in a food company in China, regardless of the quality of your partner, you’re still exposed to the supply chain,” said David Mahon, a dairy consultant and head of Mahon China Investment Management, referring to the Arla-Mengniu deal. “The lesson from melamine would not have been learned, and that would be a pity.”
The private equity firms Hopu, Kohlberg Kravis Roberts and Carlyle Group all took stakes in Chinese dairy companies in 2008 and 2009.
Hopu is winding down its fund and got out as soon as it could, but K.K.R. and Carlyle have invested in technology and production systems to bring Western-style milk production to Chinese dairies, including imported cows.
“China woke up to its food safety problems with the entrance of multinational companies,” the Caixin report says. “Fast-food giants McDonald’s and KFC were among the first violators caught by media in 2005, when ‘tony red,’ a toxic chemical was found in fried chicken.”
Wal-Mart is another company that has recently had its share of food-quality problems in China.
“A scandal over mislabeled pork led to the closure of stores and the resignation of the country head,” the BBC reported, and the Food Safety Administration in Beijing said in March that a Wal-Mart store in the capital had “sold sesame oil and squid with dangerous amounts of cancer-causing chemicals.”
In April, the police in China arrested nine people, shut down 80 production lines and seized more than 77 million pill capsules contaminated with chromium.
In March, “artificial green peas” were discovered in Hunan Province. Shriveled peas were being reconstituted by soaking them in food coloring and bleach-like chemical additives.
“The peas were an unnatural color and had a penetrating odor,” said a local newspaper report cited by China Daily. “After 20 minutes of cooking, the peas did not turn soft but the water turned green.”
In 2010, the government issued health alerts about recycled cooking oil. It seems used oil was being scooped from gutters outside hot-pot restaurants and then reprocessed — right along with bits of sewage. My colleague David Barboza reported from Shanghai that investigators began hunting down illegal oil-recycling factories and naming found to be using the iffy oil.
China recently issued a new five-year food-safety plan that intends to simplify a welter of overlapping and contradictory regulations. The plan acknowledges that China is “still suffering from the absence of several major food safety regulations.”
Meanwhile, as the Caixin report concludes, “Regulatory standards have not been able to keep up with the ingenuity of food manufacturers.”