Milking lax product-safety laws--and tainting consumer confidence in the 'world's factory'

The milk powder isn't safe. Neither is liquid milk, yogurt or even cream-based candy with a creepy white rabbit on the label (they're apparently hugely popular).

Upwards of 53,000 children have become sick from melamine-tainted milk products made by China's dairy giants, and at least four have died so far. The Chinese government has been in full-scale damage-control mode since Shijiazhuang-based Sanlu recalled 8,875 tonnes of milk powder on Sept, 11, announcing the products had been tainted with melamine.

The purges started almost immediately: First to go was Sanlu chairwoman and general manager Tian Wenhua, who was fired from both her job at Sanlu and her Party position, and then detained by police. Then six other officials were sacked, including Shijiazhuang's Party chief Wu Xianguo, and the city's mayor and vice-mayor. About 20 people have been arrested, and several more "detained." Today, China's chief quality watchdog, Li Changjiang, stepped down. Recalls of further milk products have continued apace, as China and the countries to whom a widening range of products are exported--including Singapore, Yemen and Canada--are yanked off the shelves as a precautionary measure.

The Chinese government has been doing its best to contain the negative fallout from the scandal, or at least to get across the message that it's dealing as best it can with the escalating crisis. Premier Wen Jiabao has been visiting crammed-to-bursting children's hospitals for photo ops and to reassure panicked parents; the government has vowed to cover the medical treatment for infants sickened by the contaminated milk. Last week Beijing went as far as announcing an end to exemptions from food-quality inspection--exemptions that Sanlu and several of the other 22 dairy companies implicated in the melamine contamination all had: Some of these companies hadn't been subject to government inspection since 2005.

But that doesn't really help parents of sick kids, or consumers afraid to buy dairy products that, ironically, the Chinese government has been pushing, big time, in an effort to boost calcium intake. The companies involved weren't two-bit players--Megniu, Yili and Sanlu were among the biggest in the country's $18-billion industry--and commenters on blogs and news websites are demonstrably incensed: . This isn't China's first melamine contamination scare--dog and cat owners the world over went into panic mode when pet food was recalled in the summer of 2007 after it was found to be poisoned with melamine--but it's one of the country's biggest food-safety crises in years. It's causing locals to question the safety of products they depend on daily, and shining an unflattering global spotlight once again on the country that has become famous (and infamous) as the "world's factory."

Worse than shoddy checkups is the nature of the offending chemical: Melamine is used to make plastics and is high in nitrogen. Small amounts shouldn't cause serious damage, but enough of it can cause kidney stones, kidney failure and even death. The chemical boosts the protein reading of milk, and could have been used to disguise watered-down milk and bump up company profits--not exactly an "oops" kind of thing.

It's also clear the cover-up in this case was pretty huge: Even the official news service Xinhua is reporting there were multiple cases brought to the authorities' attention months before the September recall. According to articles on popular Chinese websites Tianya and QQ, at least one father tried to bring attention to his daughter's illness and was bought off.

Although few Chinese I've seen or spoken with will actually question the government's actions, they're angry and scared and sure as hell aren't buying any milk products if they can help it. The fear factor has already started to hurt China's dairy farmers, many of whom are forced daily to dump tonnes of milk they can't sell. The government has started exhorting Chinese people to buy milk and keep the previously burgeoning industry alive, but somehow I doubt that's going to have much of an effect. It will be interesting to see what kind of political or persuasive clout (if any) public opinion holds as this continues. The people hit hardest by the poisoned milk are China's nascent middle class--mothers who would rather (or are pressured to) return to work right after giving birth, and are wealthy enough to afford the status symbol offered by infant formula, or dairy products in general.

It still isn't clear what effect this will have in the long term--not only on a growing domestic dairy industry, but on China's role as a universal and cheap supplier. If the government's serious about cracking down on unscrupulous producers, it's going to become more expensive to do business here, driving away foreign investment; if it isn't, this will continue to happen until people are afraid to buy anything with a "Made in China" stamp on it.