China pushes back following scandals

By David Lague
Thursday, August 23, 2007

BEIJING: The ruling Communist Party is intensifying its campaign to shore up the reputation of China as a trading powerhouse following a spate of embarrassing product recalls and contamination scandals.

As China feverishly prepares to play host to the Olympic Games next year, the government is becoming pointedly antagonistic.

China is sending a clear message that it intends to crack down on tainted or defective exports. But officials are also shifting the blame: accusing the United States of protectionism, faulting multinationals for sloppiness, charging foreign media with sensationalism and finding flaws with U.S. goods like soybeans.

The sharp rhetoric is a harsher side of an internal public relations campaign. State controlled media on Sunday began broadcasting a weeklong television series, "Believe in Made in China."

On Thursday, Chinese officials described as exaggerated claims about shoddy products as a pretext to impose protectionist measures, particularly in the United States and Europe.

"As trade volume increases and economic ties become closer between China and the U.S., it's only natural that trade frictions arise," China's assistant commerce minister, Wang Chao, said, Bloomberg News reported.

"Recently, a series of U.S. trade actions has shown clear signs of increased protectionism," the official said, referring to pressure from the United States for assurances about the quality of goods from China.

A spokeswoman for the U.S. Embassy in Beijing, Susan Stevenson, would not comment on the accusations of protectionism.

In a separate statement, the Ministry of Commerce said the U.S. media were "playing up" quality and safety fears about Chinese products, which have featured prominently in newspapers and evening news broadcasts.

In the latest toy recall, the U.S. Consumer Product Safety Commission issued a notice Wednesday covering more than 300,000 Chinese-made products for children because they may contain excessive levels of lead.

After executing the former head of its food and drug safety agency and blacklisting hundreds of domestic manufacturers in response to safety concerns, China now appears to be determined to draw attention to what it sees as the shortcomings of its trading partners.

Senior Chinese officials say that foreign companies, including Mattel, which recalled millions of toys made in China, should also shoulder some of the blame for failing to detect defective or dangerous products.

Some trade experts agree that importers, particularly large multinationals with manufacturing operations in China or substantial contracts with Chinese suppliers, were also responsible for product safety.

"Nobody forbids these companies having their own quality control guys in China," said Enzio Von Pfeil, chief executive of Commercial Economics Asia, an economic consultant. "This is another one of those cases where everybody gets to beat up on China."

The Chinese authorities have begun to aggressively publicize faults they say have been detected in imports from the United States.

China said Wednesday that it had detected pesticides, noxious weeds and soil in soybeans imported from America and had demanded that U.S. authorities investigate, according to a statement on the General Administration of Quality Supervision, Inspection and Quarantine Web site.

The same agency said Monday that 272 heart pacemakers imported from the United States in April had been returned after failing to meet safety standards.

For China, this is more than a public relations exercise, trade analysts say.

While playing host to the Olympics is mostly about image, symbolizing the re-emergence of China as an important power, the performance of its export industries is crucial to the standing of the last important Communist Party.

Exports drive the rapid economic expansion that China needs to provide jobs for millions of surplus rural workers and raise living standards across a country where poverty and hardship remain widespread.

Poor quality control, particularly if it is linked to corruption and lax regulation, could also hurt the domestic popularity of the government.

Chinese consumers are by far the biggest victims of substandard or fake products.

So far, there is no evidence that scandals over toxic residues contaminating exported food, toys, clothing, drugs and toothpaste or other substandard products have curtailed foreign orders for Chinese manufactured goods.

Wang said that demand from abroad remained strong.

To some trade experts, that is hardly surprising as Chinese manufacturers continue to expand the range of increasingly sophisticated products they sell on world markets.

From consumer electronics to supertankers, Chinese goods are seizing market share and most meet international standards for performance and safety, trade experts say.

Even a 7 percent appreciation in the value of the yuan against the dollar since July 2005 and a host of official measures aimed at restraining runaway economic growth have seemingly had little effect on exports.

China's monthly trade surplus for July reached $24.36 billion, the second biggest on record, according to official statistics released this month.

This export boom along with surging domestic investment propelled economic growth to 11.9 percent in the second quarter against the like period in 2006, the fastest expansion in more than 12 years.

The trade surplus for the year to the end of July increased by 81 percent to $136 billion and some analysts expect the full year surplus to reach $300 billion, easily exceeding the record last year of $177.5 billion.

Despite this strong performance, the authorities appear to be worried about the damage to the international image of the nation.

As part of its response to the growing chorus of foreign complaints, China has appointed one of its top officials, Deputy Prime Minister Wu Yi, a tough bureaucrat who negotiated the entry of China into the World Trade Organization, to head a panel that will investigate food and product safety.

Wu, who some analysts regard as a government troubleshooter, was also drafted to lead the fight against the 2003 SARS outbreak and restore domestic and international confidence in the health system in the nation.

Her panel will also include Health Minister Chen Zhu, Agriculture Minister Sun Zhengcai and the senior official responsible for quality control, Li Changjiang, head of the General Administration of Quality Supervision, Inspection and Quarantine.

While acknowledging that as a developing nation it does suffer from quality problems, China on Friday published a report defending its domestic and international food safety record.

It said food exports had increased by 13.29 percent in 2006 to 24.2 million metric tons worth $26.7 billion.

"The qualification rate of exported food products has been over 99 percent for many years," the report said.

It noted that 477 batches of 55,000 food product exports to the United States had been rejected in the first half of 2007, an acceptance rate of 99.1 percent, while 99.8 percent of food exports to the European Union had been accepted.

The report also cited Japanese data that showed that Chinese food products shipped to Japan were more widely sampled and had a higher acceptance rate in that country than exports from the European Union and the United States.

"Over the years, the Chinese government has endeavored to improve food quality, ensure food safety and protect consumers around the world," it said.

China is also considering setting up recall systems for faulty products, according to reports in the state-run media.

Source: The International Herald Tribune
China pushes back following scandals