August 13th 2007

For Chinese exporters, from being prize catches for global retailers to subject of scrutiny from suspicious international consumers, it has been one heck of a ride. 

While some irresponsible Chinese suppliers are surely to be blamed for the Chinese product scare abroad and need to be punished accordingly, as the Ministry of Commerce has done with over 400 exporters, the key question remains: how did tainted products reach consumers unhindered? 

Take the recent recall of 1.5 million China-made toys of Mattel, the world's largest toymaker. Most of the toys were made at Mattel's own plants in South China's Guangdong Province and shipped to the United States before ending up on the shelves of retailers such as Wal-Mart. 

An unsuspecting mother shopping for toys in the US may or may not know from which factory the toy originated. But surely with names such as Wal-Mart and Mattel, she can't be faulted for being complacent about product quality? 

The problem of product safety, which has caused a widespread scare and hurt bottom lines - Mattel says the recall would reduce its earnings in the second quarter by US$30mil - reflects in part the loopholes in the quality control system of multinationals. 

“The security of a product is related to every step of production and distribution,” says Guo Geping, president of China Chain Store and Franchise Association. 

Food safety problems in big supermarkets are nothing new in China. French retail giant Carrefour is a frequent target of criticism of Chinese consumers. Last year, one of its supermarkets in Beijing was found selling maggoty fish.  

Sometimes the problem lies with the business partner of the retailers in question. 

German retail giant Metro once found that the delivery company it hired to transport meat switched off the refrigerator to save electricity on the way and would turn it on only when arrived at the supermarkets. The meat still looked frozen but it would be far from fresh. The retailer had to take extra measures to supervise the entire process. 

“It's not that they do not want to control quality, sometimes the staff working at the supermarkets simply have no idea how to go about it,” says Wu Jianzhong, chairman of Wumart Stores Inc, a major retailer in Beijing. 

Monitoring the scattered small and medium-sized manufacturers is another big challenge in the quality control system for retailers. 

China has nearly 450,000 food manufacturers, of which roughly four in every five employ fewer than 10 people, according to the General Administration of Quality Supervision, Inspection and Quarantine. 

Benny Liu, head of the Quality Assurance Team of Wal-Mart China, says the cost of quality supervision in China is much higher than that in the US. “There are not many big large-sized farms in China as in the US and many of the suppliers turn out to be individual household farms or people running a business in their backyard,” Liu says. 

Wal-Mart has over 20,000 suppliers in China, and testing the quality of the thousands of food additives used by all of them is nearly impossible. 

But in some cases, manufacturers are as unaware of the problems as consumers and retailers. 

To ensure the quality of supplies, retailers often ask for licenses and certificates from suppliers. But even that doesn't help as suppliers equipped with all kinds of certificates may also prove equally inept at quality control. And that reflects the loopholes in the wider regulatory system. 

“In such cases, the retailer should not be held responsible,” says Guo from the store and franchise association. 

Actually, the fact that these problems are getting detected are a progress in itself. Retailers have started to train their staff to better understand quality issues and how to deal with them. The Ministry of Commerce last year also published a detailed guideline for the operation of supermarkets. 

In choosing suppliers, while concentrating on their reputation, retailers have also begun to nurture some long-term partners and supervise them more closely. 

Wal-Mart now works with local farms in Guangdong Province to procure vegetables. According to Liu, Wal-Mart is involved with the farm from the very beginning of the planting process right up to the delivery stage. 

Some companies are also building a system to label products according to their origin. With this system in place, both consumers and retailers will know whom to complain to in cases of safety problems. 

As for the government, it is encouraging farmers to unite and form associations. To weed out shoddy products, some government bodies are also striving to clean up small food businesses, preventing their products from being sold in supermarkets. 

The number of such firms will be slashed by half by the end of 2009, according to Wu Jianping, an official from the General Administration of Quality Supervision, Inspection and Quarantine.