Infant formula scandal sours faith in Chinese products

Chinese authorities have found the industrial chemical melamine in baby milk made by almost two-dozen producers. This suggests the nation's problems with toxic infant formula extends well beyond products produced by Hebei province-based Shijiazhuang Sanlu Group Co., the nation's leading producer of powdered milk and the initial target of the probe (Beijing's State Council said that the company received complaints of contamination as early as December 2007 but failed to act on them). Sanlu was 43%-owned by New Zealand-based Fonterra Co-operative Group Ltd., the world's largest dairy exporter, until Wednesday, when Fonterra chief Andrew Ferrier announced the company was cutting its stake in Sanlu by nearly 70%.

Government investigators since have found that 69 batches of formula (as well milk and yogurt) made by some of China's best-known producers including Mengniu Dairy, the nation's largest milk company, were contaminated with the chemical, according to a statement by China's General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), the Chinese agency that monitors food and product safety. (Melamine, which is normally used in nonfood products, was found in tainted pet food exported from China to the United States last year.)

China's state-run Xinhua news agency reported Tuesday that an estimated 54,000 babies have been sickened by the tainted formula. Close to 13,000 are still hospitalized, including 104 who are in serious condition. So far, four infants have died as a result of acute kidney failure after drinking the bad milk. The news prompted the resignation of Li Changjiang, the once well-respected head of the AQSIQ. Following a wave of product safety scandals involving lead-laden toys, toxic seafood, bad toothpaste, watered-down jet fuel, inferior tires and other faulty products, the agency became the target of increased scrutiny and Li promised to clean up China's image.

On Monday, the World Health Organization urged stricter monitoring of the Chinese dairy industry. Authorities in China are scrambling to shore up public confidence. Sanlu's board chairwoman and general manager, Tian Wenhua, was given her walking papers. And officials have ordered the recall and destruction of all tainted products.

Retailers outside the mainland have begun pulling Chinese milk products from store shelves and about a dozen Asian nations have banned the import or sale of infant formula from China. Officials in the United States.S. and Europe have said consumers in their respective countries would not be affected since Chinese formula isn't approved for import.

Early indications are food and health inspectors simply ignored the tell-tale signs of trouble in the milk supply. The widening scandal once again calls into question China's ability to control food and product safety, and will likely have a profoundly negative impact of China dairy industry, which has had it good over the past five years. Milk formula alone is expected to rake in about $3.45 billion in revenues this year, a nearly 200% jump since 2003, according to market researcher Euromonitor International.

China imposed a myriad of regulatory laws and standards last year in response to past product safety problems. But even with stepped up regulations and procedures introduced by the Chinese government in an attempt to restore consumer confidence and preserve export markets, China appears to have a long way to go before its can stand up to international muster, at least in the area of food and product safety.

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