"Made in China" label battered by product scandals

BEIJING (Reuters) - Milk, toothpaste, cough syrup, pet food, eels, blood thinner, car parts, pork, eggs, honey, chicken, dumplings, cooking oil and rice -- if you can fake it or taint it, you can almost guarantee it's happened in China.

A string of product safety scandals, including contaminated infant formula that is believed to have killed six babies and sickened thousands of others, have rocked the faith of shoppers, making them wary of buying products made in China despite the often cheaper price tag.

"I was physically disgusted when I saw it on the TV," said Sally Villegas, a mother of two in Australia, referring to the melamine-tainted infant formula scandal that came to light in September.

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"If I'm shopping and I pick up a product made in China, yes I would put it back."

The melamine scandal was the latest in a string of recent high-profile safety problems that included lead paint on toy cars and contaminated Chinese-made blood thinner heparin which was blamed for fatalities in the United States and Germany and prompted a global recall early this year.

After each scandal, Beijing seemed to have the same response: launching a crackdown, destroying tainted goods on television, jailing a few officials and saying they "pay great attention" to the problem.

Trouble is, for all the government's efforts and exhortations, the scandals keep happening, and will likely keep on happening, due to lax rule enforcement, fragmented industries, widespread poverty and the sheer size of China, analysts say.

"I'm sure that there will be more. It's a near certainty. Not only in the fields that we've seen already, but in other ones," said Duncan Innes-Ker, a China analyst at the Economist Intelligence Unit in Beijing.

"China faces a lot of problems because it is developing into a big but very poor economy, and obviously you can't have Western-style safety mechanisms in an economy where half the population doesn't earn much more than a couple of dollars a day," he added.

CHINESE PRODUCTS SHUNNED

Jin Biao, vice president of Inner Mongolia Yili Industrial Group, one of China's largest dairy producers, admitted the melamine problem had dented the country's already badly tattered reputation overseas.

"The contamination was our management problem. We must first resolve it without trying to pass the blame on to the farmers, or to society, or the country," he told Reuters.

Yili was named as one of 22 companies found to have produced drinking milk contaminated with melamine, though after thorough inspections China now insists the problem has been effectively removed from the dairy industry.

Melamine, a chemical used to make plastics, was added to infant formula to cheat quality control tests on protein levels. The scandal led to bans around the world on food containing Chinese dairy products.

The United States last month issued an import alert for Chinese-made food products, calling for foods to be stopped at the border unless importers can certify that they are either free of dairy goods or free of melamine.

"I think it's evident to the Chinese that when there's a quality problem, it does more than just hurt that industry segment," U.S. Health Secretary Mike Leavitt said on a recent visit to Shanghai. "It damages the entire made-in-China brand."

The U.S. move prompted an angry reaction from China, which called it "unilateral" and expressed "deep regret."

But consumers are already voting with their wallets.

Following the melamine problem, Taiwan supermarkets for example reported soaring sales from goods clearly marked as being "made in Taiwan," stressing that they did not come from across the strait and were therefore trustworthy and top notch.

It is not a simple matter just to boycott all Chinese goods, said Matthew Crabbe, managing director of research firm Access Asia.

"I don't think really people understand how much is actually made in China," he said.

Moving production to some other low-cost country would also not solve the problem, Crabbe added.

"They'd just have the same problems over again. They'd go to Bangladesh or somewhere, and then they'd have exactly the same problems yet again. It's the quality control."

COVER-UPS

The challenges posed by China's poverty are exacerbated by corruption and the autonomy carved out by local governments, many of them hundreds of kilometers from officials in Beijing trying to rehabilitate the country's reputation.

A culture of covering-up bad news, or delaying reporting problems to higher-ups, only adds to the challenge.

The city government of Shijiazhuang, home to the Sanlu company that was at the center of the melamine scandal, initially failed to report the problem, fearing perhaps it could have wrecked the happy image being portrayed for the Beijing Olympics.

This attitude is changing though, observers said.

Anthony Hazzard, the World Health Organization's Manila-based regional adviser on food safety, said he was heartened by the way China had begun sharing information following the melamine scandal.

"That there is an openness and sharing of information will strengthen confidence," he told reporters in Beijing.

"Of course, confidence at the moment is battered. But the only way to rebuild confidence is to put in place an effective food control system from the farm to the table, and we hope that they do that."

Still, it is probably only a matter of time before the next scandal unfolds in a country where even drugs are fair game for the unscrupulous seeking to make a fast buck.

"Next would probably be the fake pharmaceuticals industry, the herbal pills sector," said Access Asia's Crabbe. "God knows what goes into those things, and what regulation there is, if any, of that industry."

(Additional reporting by Emma Graham-Harrison in Beijing, Rujun Shen in Shanghai and Pauline Askin in Sydney; Editing by Megan Goldin)