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<a href="http://www.nytimes.com/"><img src="http://graphics8.nytimes.com/images/misc/nytlogo153x23.gif" alt="The New York Times" align="left" border="0" hspace="0" vspace="0"></a>
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<div class="">July 26, 2013</div>
<h1>The Baby Formula Barometer</h1>
<h6 class="">By
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<a href="http://topics.nytimes.com/top/opinion/editorialsandoped/oped/columnists/joenocera/index.html" rel="author" title="More Articles by JOE NOCERA"><span>JOE NOCERA</span></a></span></h6>
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<p>
Edward Wong’s terrific front-page article in <a href="http://www.nytimes.com/2013/07/26/world/asia/chinas-search-for-infant-formula-goes-global.html"> The New York Times on Friday</a>
is as good an encapsulation of the issues currently facing China and
its economy as anything you’re likely to read on the subject. As it
tries to move from a fast-growing, export-oriented, developing economy
to a more mature economy, it keeps bumping up against problems that
could prevent it from becoming the kind of economic power it so clearly
longs to be. These problems are almost entirely self-inflicted. </p>
<p>
Wong’s article was about, of all things, infant formula. Specifically,
it was about how Chinese parents with connections and money scramble to
buy formula abroad, even though there is plenty available in China. They
hire people who will go into stores in Britain and elsewhere and buy
formula for them. Or they buy formula that has been smuggled in from
Hong Kong — where smuggling infant formula is now a serious crime.
Mainly, Chinese parents want to ensure that the formula they are feeding
their babies has never been touched by a Chinese company. </p>
<p>
The reason is obvious. In 2008, six babies died and some 300,000 became ill after their mothers fed them <a title="A Times article from October 2008" href="http://www.nytimes.com/2008/10/17/world/asia/17milk.html">baby milk products that were tainted with the chemical melamine</a>. Ever since, Chinese mothers haven’t trusted domestically made baby milk products — starting with formula. </p>
<p>
In fact, as I learned during my recent visit to China, Chinese consumers
don’t trust a lot of Chinese-made goods. In recent years, there have
been food scandals surrounding <a title="A Times article from March 2010" href="http://www.nytimes.com/2010/04/01/world/asia/01shanghai.html">cooking oil</a>, <a title="A Times article from October 2008" href="http://www.nytimes.com/2008/10/27/world/asia/27china.html">eggs</a> and meat, for starters. A few months ago, <a href="http://newsfeed.time.com/2013/05/06/40-tons-of-tainted-pork-allegedly-sold-in-china/">according to Time magazine</a>,
three people were caught processing pigs that had died of infectious
diseases. A few years ago, contamination of Chinese-produced heparin,
the blood-thinner, <a title="A Times article from April 2008" href="http://www.nytimes.com/2008/04/22/health/policy/22fda.html">was linked to 81 deaths</a>.
Chinese consumers don’t even favor Chinese cars — foreign models
dominate the market — because they fear that someone may have taken a
shortcut (or worse) that will cause the car to die. </p>
<p>
So problem No. 1: At a time when China is trying to build a domestic
economy to match its export economy, there is a complete lack of faith
in Chinese companies. “It is not about branding,” an American
businessman living in Shanghai told me (he feared consequences to his
business if he let me use his name). Rather, he said, there is a sense
among consumers that no matter what the industry, too many Chinese
businesspeople are willing to scam their own customers to make a buck.
</p>
<p>
With corner-cutting deeply ingrained as a Chinese business practice,
it’s really up to the government to change that ethos through regulation
and enforcement. But while the central government is more than happy to
pass nice-sounding laws, there is virtually no enforcement, and no real
culture of regulation either. That’s problem No. 2. Provincial
governments that are supposed to oversee, say, the food supply, are
often either in on the scam, or look the other way because they fear
that a crackdown might impede economic growth. And officials are
evaluated almost exclusively on the basis of growth. Problem No. 3: bad
incentives. </p>
<p>
And if your car does break down in six months because a supplier sold
faulty parts — or your child dies from tainted infant formula? There’s
not a thing you can do. Yes, when a big scandal breaks, <a href="http://www.cnn.com/2009/WORLD/asiapcf/01/22/china.tainted.milk/">some crooks go to prison</a>,
but even the biggest scandals don’t lead to systematic change. Nor is
there any way to seek recompense in the courts; in the West, that has
long served to help keep companies on the straight and narrow. The lack
of a real rule of law is problem No. 4. </p>
<p>
As Wong notes in his article, the government is now investigating
foreign companies selling infant formula in China for price-fixing.
(Since the scandal, the price of a can of foreign formula has risen by
30 percent.) Whether there is price-fixing or not — market forces are a
more likely culprit — this response is exactly the problem: instead of
enforcing regulations that would give consumers confidence in their own
country’s products, the government instead is finding ways to make life
more difficult for those who make products its citizens want. </p>
<p>
In the United States, of course, it has become religion among
conservatives to denounce regulation, saying it stifles business and
hinders economic growth. But consider: At the turn of the last century,
America was as riddled with scam artists as China is today. Snake oil
salesmen — literally — abounded. Food safety was a huge issue. In 1906,
however, Upton Sinclair published “<a href="http://www.gutenberg.org/files/140/140-h/140-h.htm">The Jungle</a>,” his exposé-novel about the meatpacking industry. That book, pointed out Stanley Lubman, a longtime expert in Chinese law, <a href="http://blogs.wsj.com/chinarealtime/2013/05/21/why-americans-should-worry-about-chinas-food-safety-problems/">in a recent blog post</a>
in The Wall Street Journal, is what propelled Theodore Roosevelt to
propose the Food and Drug Administration. Which, in turn, reformed
meat-processing — among many other things — and gave consumers
confidence in the food they ate and the products they bought. </p>
<p>
That’s what China needs now. Infant formula just scratches the surface. </p>
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<br clear="all"><br>-- <br>Art Deco (Wayne A. Fox)<br><a href="mailto:art.deco.studios@gmail.com" target="_blank">art.deco.studios@gmail.com</a><br><br><img src="http://users.moscow.com/waf/WP%20Fox%2001.jpg"><br>
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