CHINA: China Food-Safety Chief Resigns in Dairy Scandal

Publisher Name: 
Wall Street Journal

China's top food-safety official resigned as a dairy contamination
scandal brought more international recalls of Chinese products and
heightened fears among dairy farmers that their livelihoods were in
danger.

On Monday, Nestlé SA was forced to recall a type of milk it sells in
Hong Kong and New Zealand's prime minister criticized her country's top
dairy company for not speaking out sooner about problems with the baby
formula it produces in a Chinese joint venture.

[Li Changjiang]Associated Press

Li Changjiang resigned from his post as head of China's food-safety watchdog.

Complications
from toxic melamine in formula have been linked to the deaths of at
least three children in China and the illness of more than 50,000. The
scandal began when officials revealed on Sept. 11 that milk powder made
by Shijiazhuang Sanlu Group Co. was the cause of a spate of kidney
stones among babies. A subsequent investigation found over 20 other
companies had tainted products. Melamine was also found in
Chinese-produced liquid milk and yogurt.

Li Changjiang, 63 years old, minister of China's General
Administration of Quality Supervision, Inspection and Quarantine since
2001, resigned Monday, "taking the blame for supervision default,"
according to China's official Xinhua news agency.

Mr. Li, who during his tenure often defended the international
reputation of Chinese products, is the highest-ranking official to
leave his post because of the dairy scandal. Others to resign include
the mayor of Shijiazhuang, where formula-maker Sanlu is based.

Sanlu and New Zealand's Fonterra Co-operative Group Ltd., which owns
43% of the company, have been criticized for not immediately notifying
the public when the contamination was confirmed in early August.­

Milk
dealers have been arrested and government officials fired as milk
powder laced with melamine poisoned more than 12,800 babies and killed
4. WSJ's Loretta Chao reports.

New Zealand Prime
Minister Helen Clark said in a radio interview Monday she felt there
was an unsatisfactorily "long period of time before Fonterra spoke"
out, according to the Associated Press. Fonterra's chief executive said
last week that company officials tried to "encourage" the Chinese
company to go public with the problems.

Chinese supermarkets, schools and Starbucks outlets have voluntarily
pulled dairy products off the shelves, and consumers have been flocking
to foreign brands.

But on Monday, Nestlé issued a recall of one brand of its milk sold
only in Hong Kong to caterers and other commercial customers, after
health authorities in the city found traces of melamine in a sample of
the product.

In a statement, Nestlé said it was issuing the recall of the product
in Hong Kong to comply with orders from Hong Kong's food-safety
department. The company said that the product was never shipped to
customers and that the trace amounts of melamine in the product in Hong
Kong don't pose a health risk.

Nestlé added that its other products have been tested extensively and cleared by regulators in Hong Kong and Beijing.

Spilled Milk

Chinese dairy recalls -- and concerns -- have spread since the scandal broke

Sept. 12: Sanlu recalls 700 tons of baby formula in China.

Sept. 14: Taiwan authorities seize thousands of bags of Sanlu commercial milk powder.

Sept. 16: Chinese authorities find melamine in baby
formula from 22 producers and order recall; Hong Kong supermarket chain
Wellcome recalls line of Yili frozen yogurt bars after authorities find
melamine.

Sept. 19: Starbucks discontinues use of Mengniu milk. Singapore suspends import and sale of dairy products from China.

Sept. 20: Japan's Marudai Food Co. announces
precautionary recall of five Chinese-made products; Gabon officials ban
import and sale of Chinese powdered milk.

Sept. 21: Hong Kong authorities say they found traces of melamine in a batch of Chinese-made Nestlé commercial milk.

Sept. 22: Hong Kong authorities force Nestlé to recall the milk line.

A separate statement from the Hong Kong government said
that it is researching the threshold at which melamine becomes harmful
for human ingestion and suggested that the chemical may sometimes make
its way into food naturally.

Taiwan, Japan, Singapore, Malaysia, Bangladesh, Brunei and Gabon are
among other importers to have issued recalls or bans of Chinese-made
dairy products. The EU last week told its 27 member nations to boost
border controls for all Chinese milk products. It was a symbolic
gesture: The EU refuses to let in most food imports from China,
including dairy products, because of safety concerns.

China's dairy exports are small in comparison to its domestic
consumption, but the international concerns compound damage in the past
year to China's reputation as the world's manufacturer. Recent lapses
have involved toys containing lead paint, melamine-contaminated pet
food and toothpaste tainted with a chemical used in antifreeze. The
latest scandal involved adulterated supplies of heparin, an
anticlotting drug produced in China that was linked this year to more
than 80 deaths in the U.S.

This time, most of the known victims have been in China, putting greater domestic pressure on Chinese leaders to take action.

That Mr. Li, who held a minister-level position, was allowed to step
down rather than face dismissal suggested the government doesn't intend
to blame him for the problems, but wished to show a degree of
accountability.

In recent history, some other senior officials who have resigned or
been fired amid scandal have been given new appointments. Xie Zhenhua,
who headed the State Environmental Protection Administration until he
quit in 2005 for a river-pollution disaster, was appointed vice
minister of the National Development and Reform Commission last year.
Meng Xuenong was dismissed as Beijing mayor in 2003 amid the search for
accountability for the poor handling of the SARS outbreak. He later
became governor of Shanxi province -- only to resign this month after a
mining accident.

As the current scandal unfolds, tensions are high in milk-producing
centers in Shijiazhuang and the sprawling farmland around Hohhot, the
city in Inner Mongolia where China's biggest dairy companies, Inner
Mongolia Yili Industrial Group and Mengniu Dairy Co., employ thousands
of workers.

Dairy farmers say they are shouldering the brunt of the fallout, as
companies return their milk, citing poor quality, or stop buying it
altogether.

Mr. Liu, a 52-year-old dairy farmer in Hohhot, said he is watching
his savings dwindle as his family's milk, which is no longer being
bought by the companies, is poured out day after day. Dealers paid him
4.6 yuan, or 68 cents, per kilogram (about 31 cents a pound) of milk.
"This life really is hard," he said.

At one milk station, where milk was rejected for three days in a
row, Li Sixi, a 52-year-old sanitation worker, said the situation was
making farmers uneasy. "If this kept going for longer ... farmers would
have had to kill their cows," he said.

Mr. Liu said he is close to paying off the $2,900 he borrowed in
2001 to begin raising milking cows. He spends about 1,000 yuan on
feeding seven cows every month, and earns a monthly profit of 500 yuan.

Mr. Liu said the business was more profitable for him than farming
corn and potatoes, and he's hoping he'll be able to sell his milk again
once the scandal dies down.

Many farmers in Shijiazhuang who relied on Sanlu said they doubt the
company will survive. A 26-year-old dairy farm owner there says he has
been pouring more than ten tons of milk into a river near his home
every day for over a week, with no end in sight.

Mr. Li's resignation is the latest development in the government's
effort to overhaul an industry that is seen to be rife with
supply-chain control problems.

Zheng Yongnian, director of the East Asian Institute in Singapore,
said an industry overhaul needs to take into account the many people
along the long production chains. "China can't just commercialize its
milk industry and adopt the U.S. model overnight. ... Millions of dairy
farmers will be jobless and there will be big social instability," said
Mr. Zheng.

AMP Section Name:Food and Agriculture