The Systematic Problems of the Milk Scandal

More than 50,000 babies are affected, of which more than 12,000 have been hospitalized. So far, 4 children have died, and more than 100 babies are in serious condition. The number of victims of harm milk is piling up. The practice of adding melamine and other harmful materials into diluted milk now in the dairy industry has become a well-known matter of fact. This dirty open secret within the diary industry has finally been exposed to the public in China, only at an extremely high human cost.

In addition to Sanlu Group, Mengniu and Yili, another two famous brands of diary products have failed the test of melamine. Those two brands have more media exposure on the state media, generally employing celebrities to be advertising spokespersons. In fact, the manufacturing facilities in those factories can be called state of the art, which have attracted tourists in the cities like Hohhotm, and site visit of those modern factories easily leaves trustworthy impression on visitors.

The big picture is that China is in high demand of diary products, ranking the third in the world regarding diary products consumption, which understandably resulted from the improvement of common people's living standard. However, the current supply of diary products is lagged behind the demand. According to some projections, milk production is expected to grow at the 6%-9% annually, and it's quite obvious that individual dairy farmers as the primary suppliers of raw milk couldn't cope with such a growing demand.

According to this SCMP report, only one out of 90 cows is fed at the modern farm park in Hohhot alone, and most of cows are raised in the ragged backyards of dairy farmers. This should be a typical case as Hohhot is the hub of China's dairy industry. The problems such as lacking technical know-how, and the support from both the government and manufacturers are still prevailing. Safety loopholes are actually quite easy to be identified as this insider's account recalled the malpractice before the scandal broke out :

"Whenever my milk failed the quality test, they [used to] direct me to a different place and ask me to unload my milk into a factory milk container" (Wu Tianhua, a milk dealer from Licheng county in Hohhot)

The fundamental issue is the quality of raw milk, and manufacturers are directly responsible for allowing contaminated milk to enter into production lines.

As a result, the chief quality inspector Li Changjiang, head of the General Administration of Quality Supervision, Inspection and Quarantine resigned today, and so far several officials accountable for the problem both at the city level have been sacked, including Wu Xianguo, the Communist Party chief, Mayor Ji Chuntang and Vice Mayor Zhang Fawang of Shijiazhuang city, where Sanlu Group is located.

This report says 'under the Civil Servants Law effective as of 2005 and the State Council Regulations on the Punishment of Civil Servants of Administrative Organs enacted last April, heads of administrative organs who fail to fulfill their duties and cause avoidable severe accidents to happen will face removal and severer punishment.'

However, for those directly involved in the scandal, including diary farmers, manufacturers and the third party officials in charge of quality inspection, the ultimate legal reference should be the Food Safety Law that which the draft version was publicized in April, and thereafter has been submitted to the legislature for the rectification.

According to the draft version, manufacturers who produce harmful food could be jailed for life, but it does not cover food products from the farm to the final consumers, observed by WHO China's representative Hans Troedsson.

The Ministry of Commerce and State Administration for Industry and Commerce (AQSIQ) also worked out an important measure which requires food product to carry a code allowing consumers to trace back their place and time of origin. It's supposed to be implemented by the end of June, but was postponed to the end of this year.

So far, it's not clear when the draft of the Food Safety Law will become the law, but the latest milk scandal offers a rare opportunity for the legislative members to review the draft more thoroughly. The final version should cover the complete chain of food products from the farm to the final consumers, and basic agriculture products such as rice need to be covered as well.

Melamine, again!

An unfamiliar word suddenly has become hot in town talks. Melamine, a stuff that is supposed to be used in non-food industry, has been found in Sanlu baby milk powder in China, and so far has caused one infant death and kidney stones in dozens of babies. The contamination is confirmed by China's Ministry of Health on Friday.

This latest case of food safety scandal reminds me of Anhui Fuyang baby milk powder scandal in 2004, in which harmful milk powder caused hundreds of babies suffer from malnutrition. Sanlu's case is far more serious than the previous one, because Sanlu is a famous brand in China and its distribution channel is nation wide, so it's not a surprise to see more reports about kidney stone baby popping out in different places as time goes by.

Since the questionable baby milk powder had enjoyed the privileging status as an quality-inspection-free product before the safety problem was detected, the scandal will damage the reputation of the national accreditation system for food quality as well, and it will take a lot of effort and longer time for the authority to restore the confidence of consumers.

Wiki provides a thorough description of this material, and it's updated to the latest development of Sanlu milk powder scandal. From the existing reports, the diary farmers add melamine into diluted milk to pass the test of protein content.

This harmful material has been used discreetly in manufacturing animal feed, as a cheaper alternative to real soy bean protein. The issue was addressed last year in the case of pet food being exported from China to the US, and this NYT report provides detailed background.

In retrospection, if that pet food scandal was highlighted in the food industry last year, probably some preemptive measures would be taken to improve the method of testing protein content.

The question is how come those diary farmers can simply add melamine to diluted milk and pass the quality check? Punishing those who are directly responsible for providing fake milk is just the first step. Sanlu group and the quality accreditation authority must also be held accountable, and a thorough investigation should be conducted, followed by the improvement of the testing method.

colossal CDB shows its appetite, but is it healthy?

This murky state-owned business world. Tactics, strategies, national interests and corruption, how CDB's involvement in an acquisition case has become a complex issue. 

It's quite obvious that Dresdner is in trouble, and Allianz wants to sell it. CDB's bid to buy is favourable to some German, as this FT story reports,

'The Chinese pitch appealed to German unions, Dresdner management and some German politicians because CDB was prepared to keep all the bank’s staff, whereas Commerzbank has announced plans to cut 9,000 jobs at the two banks.'

However, even CDB hasn't submitted a formal bid, its intention already made some patriotic observers in Germany ring the alarming bell. Andreas Nolting once gave two reasons in this article that why German should prevent CDB from buying Dresdner, 

'Firstly, a takeover by CDB would have placed yet more of Germany's banking sector under foreign ownership. Secondly, the Chinese never said or even hinted at what they planned to do with Dresdner and why they wanted to buy it. Such secrecy should not be rewarded.'

Interestingly, even Andreas realizes the serious problems that Dresdner is facing, as trade unions 'lobbied and demonstrated in favor of a takeover of Dresdner by CDB', the answer is still no. 

Stay cool! Since the deal is not promising, the decision of China's state council to hold back the approval is a reasonable one. Judging from CDB's past track record in foreign acquisition, prudence and close scrutiny from the State Council is certainly necessary.    

Besides, CDB is also in trouble.

'It has also been rocked by scandal after the arrest of vice-chairman Wang Yi in June and his continued detention as part of a probe into alleged corruption and a report from the state auditor that the bank extended billions of renminbi in illegal and irregular loans last year.' 

Better to improve its performance from within before allowing it to take any ambitious overseas acquisition, like another one into the Polish telecoms market, simply because it sounds good. 

Bizarre Mooncake

The traditional mid-Autumn (moon) festival is coming, so moon cakes are widely available now in various shops. I received a box of simply-packed moon cakes from my parents several days ago, a kind of family tradition indeed. Probably that's the only reason, a bit nostalgic, that would propel me to eat those greasy sweet cakes to celebrate the Festival.

When I was a child, the choice of moon cake was very limited. Yolk, ham, bean, date etc, probably all together moon cake stuffing had less than ten types. But in recent years, a lot of new types of moon cake have been created to lure customers. Tea, ice cream, coffee, mushroom, organic cereal, all sorts of fanciful or healthy stuffing are put inside a piece of tiny cake. Still, it's a seasonal food, which perhaps explains why it's not like tart, or cookies, that you can always have it as a kind of daily delight with a cup of coffee or tea.

In fact, no matter how attractive the stuffing sounds to me, I simple would ignore it when I step into a lovely bread shop at the street corner opposite the east gate of the Temple of Heaven. Until a friend of mine who just visited China for the first time showed special interest in those tiny moon cakes, wondering why one piece was nine RMB while a blue berry tart was just five, did I notice that there were quite a lot of moon cakes being displayed there. At the moment he asked that question, we just finished our breakfast, and I suddenly realized that probably I should have treated him a piece of real moon cake. That nine-yuan moon cake has pine mushroom (matsutake) inside, it should be tasteful.

A bit strange though, today when I saw that vulgar gold moon cake in the newspaper, I ruminated a bit on why I lost my touch to this seasonal food. I guess I'm not the only one having such a mentality. There is a saying in China now that those who buy moon cakes will not eat them, and those who eat moon cakes generally would not buy themselves. They have become gifts, not made purely for the pleasure of taste buds and for the family re-union, but for lubricating Guanxi or bribery, with sumptuous packing and ridiculous stuffing such as gold, jade, silver, or even platinum.

For the pure gold moon like the one in the photo, it can be sold with the prize tag nearly 10,000RMB. Everybody knows its purpose, and every year when the Moon Festival is approaching, there are always some extremely bizarre and expensive moon cakes being sold in the market. Creativity in bribery is abundant!

Gone are the days when moon cake is simply a nice small cake, while eating it under the full moon, with some snacks and liquor, brings so much joy among family members and friends. When a delicate tradition connecting to our inner world has been spoiled by those bizarre gold cakes and bogus practice of Guanxi, perhaps I can excuse myself for forgetting to treat my friend a piece of real nice moon cake.

Procedural Justice? Yang Jia's Death Penalty

Cop killer Yang Jia （杨佳）was sentenced to death today. The report from Xinhua says:

'The court ruled Yang had perfect capacity for criminal responsibility according to a forensic psychiatric assessment conducted by a qualified and specialized institute entrusted by the police. But it didn't give a specific name.'

The sentence has received questions on the procedural justice. Xinhua's report doesn't specify the name of the institute that is responsible for Yang Jia's mental illness evaluation. On whether or not this institute has judicial testimony qualifications, lawyer Liu Xiaoyuan （刘晓源）comments in his blog that the procuratorate or the court may not re-do the qualified psychiatric testimony on Yang Jia.

The first psychiatric assessment is conducted by the Ministry of Justice's Science and Technology Research Institute (MJSTRI), and the report says 'Yang was confirmed to be of a sane mind after a judicial appraisal following the attack'. According to Mr. Liu Xiaoyuan, MJSTRI is actually not qualified institute to conduct such an expert testimony.

The death sentence is the result of the first trial, and Yang Jia now has seven days to appeal to the Shanghai People's Higher Court. If the verdict is still the capital punishment, then the case will step into the review procedure at the People's Supreme Court.

Yang Jia attacked nine cops on the 1st of July and six of them died. The sensational case immediately stirred up all sorts of speculations on how and why he went into such an extreme. Yet in just two months, his death sentence is convicted. The handling of this case by the law enforcement and judicial system in China is obviously quite fast. Because of the Olympic Games, the trial actually was postponed at the end of July.

Although the verdict of the first trial is not a surprise to many observers, the judicial procedure in handling this case has become the focus of the public attention. Some people have questioned about the transparency of the trial as the public gallery of the court was fully booked by Shanghai PSB yesterday, so basically there was no media staff inside the court to witness the trial.

While Chinese legal tradition has emphasized on the substantive justice, some procedural rules are not strictly followed or even violated by the courts. The pressure for a judge's conduct to show procedural justice has slowly been piled up from the public opinion side. Yang Jia's case will be the latest one to testify to what extent the procedural justice has been realized in Chinese judicial system.

Postscript:

Yang jia was executed on 26/11/2008. Here's Ap report for the record.