September 19th, 2008

Learning from the past: China milk scandal

In July 2007, the former head of China’s State Food and Drug Administration, Zheng Xiaoyu, has been executed for corruption, BBC News reported. He was convicted of taking 6.5m yuan ($850,000; £425,400) in bribes and of dereliction of duty at a trial in May. The bribes were linked to sub-standard medicines, blamed for several deaths.

One year later, this strong message seems to have been totally unheard. Behind the growing baby milk scandal, the scandal reveals more than a recurrent regulatory problem, CSM reports, what appears to be an ethical gap in China’s business.

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.”

Among the companies under investigation for having produced melamine-tainted milk, the Sanlu case is rather embarrassing, since the company has been exempted from government food safety inspections since December 2005.

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.

The incident became public only after Sanlu’s New Zealand partner, Fonterra, which holds three seats on the company board, informed New Zealand diplomats who told Chinese government officials in Beijing of the problem.

Today, Shanghai Daily revealed that more melanine was found in national milk check, in three of China’s leading brands – Mengniu, Yili and Bright. What will be next ?

Learning from the past is obviously not the answer, what is needed here is definitely a ethic and cultural shift in the way of doing business.

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