Can China Reform Itself?

By JOSEPH KAHN | The New York Times
July 08, 2007

PHONY fertilizer destroys crops. Stores shelves are filled with deodorized rotten eggs, and chemical glucose is passed off as honey. Exports slump when European regulators find dangerous bacteria in packaged meat.

More product safety scandals in China? Not this time. These quality problems prompted a sluggish United States government to tighten food and drug regulation 101 years ago, when President Theodore Roosevelt signed the act that created the Food and Drug Administration.

Like America’s industrializing economy a century ago, China’s is powered by zealous entrepreneurs who sometimes act like pirates. Both countries suffered epidemics of fatal fakes, and both have had regulators who were too inept, corrupt or hamstrung to do much about it.

The question now is whether Chinese factories, caught exporting poisonous pharmaceutical ingredients, filthy shellfish, bogus pet food and faulty tires, can react in time to head off more damage to their reputation.

Or, to put it another way, are the latest incidents enough to push China toward its own Progressive Era?

The answer, say people who have studied the country’s regulatory system, is a cautious yes. But first, they say, Beijing must take a fresh approach to inspecting and policing its often unruly economy.

Chinese exporters sold nearly $1 trillion worth of goods overseas last year. Fakes and shoddy goods, by most measures, made up no more than a tiny fraction of that total. Yet the string of product safety scandals reflects a persistent roguish undercurrent in the Chinese economy that extensive media coverage, new laws and tougher enforcement have not eliminated.

Teddy Roosevelt’s government had to overcome ideological opposition to regulating private-sector commerce.

China has a different political challenge: Its authoritarian government, though under the control of one party, has struggled to develop a modern, unified regulatory system that can supervise a dynamic market economy.

“Competition inside our bureaucracy has led to a diffusion of power and a tendency to shirk responsibility,” says Mao Shoulong, a public policy expert at People’s University in Beijing. “Cracking down on individual criminals doesn’t solve the problem. We need to fix the whole system.”

Safety lapses are a serious side effect of China’s gradual and still incomplete efforts to separate politics and business. To spur economic growth in the 1980s, top leaders gave local-level officials more power. The goal was to undercut socialist conservatives in the central government who exercised tight controls. Regulatory power was also scattered.

Growth surged. Entrepreneurs, foreign investors and peasant farmers assumed a dominant role in production. But safety, as well as labor and environmental standards, fell by the wayside.

Scores of people died after ingesting bathtub baijiu, or rice wine, that substituted cheap industrial-grade alcohol for the real stuff. Condiments used as spices for hot-pot cooking contained paraffin wax. Vermicelli noodles carried a cancer-causing agent, as did a popular red dye, called Sudan Red, that was used by Kentucky Fried Chicken and Heinz, among other companies.

Hundreds of parents in Liaoning Province were so frustrated by the local government’s response to a spate of food poisonings at a school cafeteria in 2003 that they blockaded the local railroad.

Perhaps the most sensational case occurred in 2004, when small factories in central China produced cheap infant milk formula that lacked protein. Some 50 infants in Anhui Province died from malnutrition after their parents and some doctors mistook their symptoms — bloated faces and hands — as a sign of overfeeding.

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