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Behind bad baby milk, an ethical gap in China's business

Inspectors found that 13 percent of dairy firms inspected since last week had produced melamine-tainted formula, state TV reported Tuesday. Critics say state regulation alone won’t prevent more food scandals.

By Staff writer of The Christian Science Monitor / September 17, 2008

Check-ups: Babies waited to be examined at a hospital in Hefei, China, on Monday. More than 1,200 infants who drank Sanlu brand milk have fallen ill.

Reuters

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Beijing

As Chinese officials warned Tuesday that contaminated milk powder may have sickened more than the 1,200 babies already identified, the scandal revealed more than a recurrent regulatory problem, Chinese and foreign experts suggested.

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Rather, they said, it pointed to a deeper malaise in Chinese society where private profit often trumps the public good as the country races to create a market economy that has outstripped government regulators.

"China has the problems of any transitional economy," says Yanzhong Huang, a global health expert at Seton Hall University in South Orange, N.J. "But the deeper and more fundamental challenge China faces is a systematic lack of business ethics."

"You cannot fully police the whole food chain," adds Dali Yang, a politics professor at the University of Chicago. "A lot depends on changes in social norms. People have to recognize that integrity does matter."

A leading Chinese dairy company, Sanlu, admitted last week that its baby formula manufactured earlier this year was tainted by the chemical melamine. Doctors in several Chinese provinces have found more than 1,200 babies who drank the formula suffering from kidney stones and renal failure. Two babies have died as a result since May, officials say, warning that the number of cases could rise sharply.

State television reported Tuesday that 22 of 175 dairy producers inspected since last week were found to have produced melamine-tainted milk. They included major brands such as the Inner Mongolia Yili Industrial Group, a supplier for the Beijing Olympics.

Investigators say it appears that milk merchants, selling to Sanlu the raw milk they had bought from farmers, had added the chemical – normally used in plastics and fertilizers – to boost the milk's apparent protein content.

Two brothers who owned a milk collection center in Shijiazhuang, Sanlu's home base, were arrested Monday on charges of adulterating the milk they had sold to the company, the state news agency Xinhua reported. Two additional milk suppliers were also arrested later that day. Seventeen others have been detained, including one man suspected of illegally selling melamine.

The case is especially embarrassing to Sanlu – a majority state-owned joint venture with a New Zealand dairy cooperative – because it was allegedly such a paragon of virtue it has been exempted from government food safety inspections since December 2005.

The company's infant formula had been certified as an "inspection-exempt product" for three years by the General Administration for Quality Supervision, Inspection, and Quarantine (AQSIQ), according to the administration's website.

Such certification means that "the products are exempted from quality monitoring and inspection conducted by the government," the website explains. In return, it adds, "internal inspection should be reinforced."

Forty-seven Chinese dairy companies currently enjoy such an exemption, according to AQSIQ, after demonstrating that they have "a complete quality guarantee system," among other criteria.

Not only did Sanlu fail to detect the melamine in its milk powder, the company has also so far failed to explain why it did not publicly reveal the problem until Sept. 11, although it had received complaints from worried parents as early as last March, and identified the contamination on Aug. 6.

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