Doing business in China: November 2007 Archives
By Ben Blanchard and Jason Subler | REUTERS | via (uncensored) Yahoo! News
November 26, 2007
The top EU trade official told China on Monday its reputation was at risk after a series of product safety scandals and that it must do more to tackle the problem.
The comments drew an icy response from a senior Chinese minister.
European Union Trade Commissioner Peter Mandelson also said Brussels was getting impatient with Beijing for failing to stamp out counterfeiting and might take the matter to the World Trade Organization (WTO).
The hard line reflects growing EU frustration over the bloc's ballooning trade deficit with China and what many firms see as unfair restrictions on their access to China's booming market.
Those issues, along with dismay that China has let the yuan's exchange rate against the euro fall sharply this year, are set to dominate a regular China-EU summit in Beijing on Wednesday.
Mandelson told a meeting on food safety that a rash of recalls of toys, toothpaste and other consumer goods had shaken global trust in China's exports. Beijing had to clamp down on defective goods to restore buyers' confidence.
"While product safety is not a problem restricted to China, it will nevertheless be central to the global perception of China's growing weight as a manufacturer," he said. "China's long-term success depends on its reputation."
While labeling recent Chinese efforts to crack down a "positive first step," he said comments by some officials that 99 percent of China's products were safe was not good enough.
"Europe imports half a billion euros worth of goods from China every day -- so even 1 percent is not acceptable," he said.
PIRACY PROBLEMS
Mandelson also tied worries about safety to what he called the "tidal wave" of counterfeits made in China.
According to the Organization for Economic Co-operation and Development, the trade in pirated consumer goods has reached $200 billion a year, equivalent to 2 percent of world trade, with many fakes coming from China.
"Some of those products -- fake medicines, fake car parts, fake aircraft parts -- carry huge risks," Mandelson said, demanding a "clearer demonstration" that Beijing was working to stamp out counterfeiters.
Chinese Vice Premier Wu Yi was not amused.
"I am extremely dissatisfied," an angry-sounding Wu, known as China's "Iron Lady," told reporters after Mandelson spoke.
From CNN's Planet in Peril report
November 20, 2007
The air smells acrid from squat gas burners that sit outside homes, melting wires to recover copper and cooking computer motherboards to release gold. Migrant workers in filthy clothing smash picture tubes by hand to recover glass and electronic parts, releasing as much as 6.5 pounds of lead dust.
For five years, environmentalists and the media have highlighted the danger to Chinese workers who dismantle much of the world's junked electronics. Yet a visit to this southeastern Chinese town regarded as the heartland of "e-waste" disposal shows little has improved. In fact, the problem is growing worse because of China's own contribution.
China now produces more than 1 million tons of e-waste each year, said Jamie Choi, a toxics campaigner with Greenpeace China in Beijing. That adds up to roughly 5 million television sets, 4 million fridges, 5 million washing machines, 10 million mobile phones and 5 million personal computers, according to Choi.
"Most e-waste in China comes from overseas, but the amount of domestic e-waste is on the rise," he said.
This ugly business is driven by pure economics. For the West, where safety rules drive up the cost of disposal, it's as much as 10 times cheaper to export the waste to developing countries. In China, poor migrants from the countryside willingly endure the health risks to earn a few yuan, exploited by profit-hungry entrepreneurs.
International agreements and European regulations have made a dent in the export of old electronics to China, but loopholes -- and sometimes bribes -- allow many to skirt the requirements. And only a sliver of the electronics sold get returned to manufacturers such as Dell and Hewlett Packard for safe recycling.
Upwards of 90 percent ends up in dumps that observe no environmental standards, where shredders, open fires, acid baths and broilers are used to recover gold, silver, copper and other valuable metals while spewing toxic fumes and runoff into the nation's skies and rivers.
Accurate figures about the shady and unregulated trade are hard to come by. However, experts agree that it is overwhelmingly a problem of the developing world. They estimate about 70 percent of the 20-50 million tons of electronic waste produced globally each year is dumped in China, with most of the rest going to India and poor African nations.
According to the U.S. Environmental Protection Agency, it is ten times cheaper to export e-waste than to dispose of it at home.
By David Cho and Ariana Eunjung Cha | Washington Post
November 15, 2007
China's extensive spying inside the United States is the greatest threat to the security of American technology secrets.
Advances by the Chinese military are catching U.S. intelligence officials by surprise.
And the Defense Department may be inadvertently outsourcing the manufacturing of key weapons and military equipment to factories in China.
These are among the key findings released today by a bipartisan panel commissioned by Congress to study the economic and security relationship between the United States and China. The U.S.-China Economic and Security Review Commission, created by Congress in 2001, has been criticized in the past for taking a hawkish stance on China in its annual reports.
The book-length report, the fifth produced by the panel, said China appears to be reversing its move toward free markets by setting up state-owned enterprises to maintain control over 12 key industries, including oil, telecommunications, shipping, automobiles, steel and information technology.
The commission also urged Congress to find ways to work with China to reduce its pollution, which is blowing significant amounts of smog into the air over the western United States, according to new studies quoted by the report. China, it added, is scheduled to build 562 coal plants over the next five years, a rate of about two a week, and may have already replaced the United States as the largest greenhouse-gas polluter in the world.
The panel presented 42 recommendations to Congress, and several of them raised questions about whether the Defense Department has been lax in overseeing the production of sensitive military technologies and gathering intelligence on the Chinese military.
The Pentagon increasingly is buying planes, weapons and military vehicles from private contractors that outsource the manufacturing to plants in China and elsewhere in Asia, the report said. But when questioned by the commission, defense officials said they do not have the ability to track where the components of military equipment are being made.
"As weaponry gets more and more sophisticated . . . I think we'll find ourselves more vulnerable for parts that are being manufactured by an adversary. It's really something the Pentagon needs to look at seriously," said commission member Bill Reinsch, who is also president of the National Foreign Trade Council, which promotes free trade on behalf of businesses.
Commission members said the group had never before delved so deeply into national security issues.
The report stated that China's military advances "have surprised U.S. defense and intelligence officials, and raised questions about the quality of our assessments of China's military capabilities."
By AFP | via (uncensored) Yahoo! News
November 08, 2007
US government authorities on Wednesday recalled 4.2 million units of a toy bead set manufactured in China after warning that it contains a substance that is toxic if ingested.
In addition, nearly 400,000 Chinese-made toys, most of them miniature cars, were recalled for containing unacceptable levels of lead paint in the latest mass recall over safety fears.
Two children slipped into comas after swallowing the Aqua Dot beads, which are manufactured in China and distributed by Spin Master in Toronto, Canada, the Consumer Product Safety Commission warned.
"The coating on the beads that causes the beads to stick to each other when water is added contains a chemical that can turn toxic when many are ingested," it said in a statement of the craft kits sold from April to November.
"Children who swallow the beads can become comatose, develop respiratory depression, or have seizures."
By Daily Press
November 8, 2007
Another recall for excessive lead was announced Wednesday by the U.S. Consumer Product Safety Commission. This new recall covers more than 400,000 toys -- all manufactured in China. These products all violate the federal lead paint safety standard.
This article was reported by Walt Bogdanich, Jake Hooker and Andrew W. Lehren and written by Mr. Bogdanich | The New York Times
October 31, 2007
MILAN -- In January, Honor International Pharmtech was accused of shipping counterfeit drugs into the United States. Even so, the Chinese chemical company -- whose motto is "Thinking Much of Honor" -- was openly marketing its products in October to thousands of buyers here at the world's biggest trade show for pharmaceutical ingredients.
Other Chinese chemical companies made the journey to the annual show as well, including one manufacturer recently accused by American authorities of supplying steroids to illegal underground labs and another whose representative was arrested at the 2006 trade show for patent violations. Also attending were two exporters owned by China's government that had sold poison mislabeled as a drug ingredient, which killed nearly 200 people and injured countless others in Haiti and in Panama.
Yet another chemical company, Orient Pacific International, reserved an exhibition booth in Milan, but its owner, Kevin Xu, could not attend. He was in a Houston jail on charges of selling counterfeit medicine for schizophrenia, prostate cancer, blood clots and Alzheimer's disease, among other maladies.
While these companies hardly represent all of the nearly 500 Chinese exhibitors, more than from any other country, they do point to a deeper problem: Pharmaceutical ingredients exported from China are often made by chemical companies that are neither certified nor inspected by Chinese drug regulators, The New York Times has found.
Because the chemical companies are not required to meet even minimal drug-manufacturing standards, there is little to stop them from exporting unapproved, adulterated or counterfeit ingredients. The substandard formulations made from those ingredients often end up in pharmacies in developing countries and for sale on the Internet, where more Americans are turning for cheap medicine.
In Milan, The Times identified at least 82 Chinese chemical companies that said they made and exported pharmaceutical ingredients -- yet not one was certified by the State Food and Drug Administration in China, records show. Nonetheless, the companies were negotiating deals at the pharmaceutical show, where suppliers wooed customers with live music, wine and vibrating chairs.
One of them was the Wuxi Hexia Chemical Company. When The Times showed Yan Jiangying, a top Chinese drug regulator, a list of 186 products being advertised by the company, including active pharmaceutical ingredients and finished drugs, Ms. Yan said, "This is definitely against the law."
Yet in China, chemical manufacturers that sell drug ingredients fall into a regulatory hole. Pharmaceutical companies are regulated by the food and drug agency. Chemical companies that make products as varied as fertilizer and industrial solvents are overseen by other agencies. The problem arises when chemical companies cross over into drug ingredients. "We have never investigated a chemical company," said Ms. Yan, deputy director of policy and regulation at the State Food and Drug Administration. "We don't have jurisdiction."
China's health officials have known of this regulatory gap since at least the mid-1990s, when a chemical company sold a tainted ingredient that killed nearly 100 children in Haiti. But Chinese regulatory agencies have failed to cooperate to stop chemical companies from exporting drug products.
In 2006, at least 138 Panamanians died or were disabled after another Chinese chemical company sold the same poisonous ingredient, diethylene glycol, which was mixed into cold medicine.
China has an estimated 80,000 chemical companies, and the United States Food and Drug Administration does not know how many sell ingredients used in drugs consumed by Americans.
The Times examined thousands of companies selling products on major business-to-business Internet trading sites and found more than 1,300 chemical companies offering pharmaceutical ingredients. How many others sell drug ingredients but don't advertise this way on the Web is not known.
If the Milan show is any guide, most, if not all, are not certified by China's drug authorities.
By Oliver August | WIRED Magazine
October 2007
I didn't know I was a surveillance target until the day I walked into a hotel in China's Fujian province. I was pushing past half a dozen workmen changing lightbulbs in the glum but busy lobby when a uniformed man stepped in front of me. Blue jacket, creased trousers, braided epaulets, peaked cap: government security officer. Politely, he asked whether I would mind answering a few questions. He stood erect, with the manicured swagger of a corporate CEO. Next to him, a gangly plainclothes colleague gave me a so-you-thought-we-wouldn't-catch-you look.
How had they known I would be here? The only people who had my itinerary were my editors in London. A few days earlier, I had sent them an email outlining my trip, and I'd been updating them daily by phone. I could only assume that the authorities had been monitoring my email and calls. I had been chasing down leads on the whereabouts of Lai Changxing, China's most-wanted man. Lai had cheated the government out of $3.6 billion by smuggling oil, cars, and cigarettes. Embarrassed, Beijing wanted to hinder any reporting of his case.
The two officers in the hotel demanded to see my passport and asked what I knew about Lai. Then they withdrew to a corner of the lobby to confer. Eventually, they took me to a police car, drove me to the airport, and put me on a plane to Beijing.
It was, in short, impressive evidence of the government's ability to monitor and control electronic communication. And my experience only hinted at the Chinese government's appetite for control. Beijing has recently added a new weapon to its arsenal of surveillance technologies, a system it believes to be a modern marvel: the Golden Shield. It took eight years and $700 million to build, and its mission is to "purify" the Internet -- an apparently urgent task. "Whether we can cope with the Internet is a matter that affects the development of socialist culture, the security of information, and the stability of the state," President Hu Jintao said in January.
The Golden Shield -- the latest addition to what is widely referred to as the Great Firewall of China -- was supposed to monitor, filter, and block sensitive online content. But only a year after completion, it already looks doomed to fail. True, surveillance remains widespread, and outspoken dissidents are punished harshly. But my experience as a correspondent in China for seven years suggests that the country's stranglehold on the communications of its citizens is slipping: Bloggers and other Web sources are rapidly supplanting Communist-controlled news outlets. Cyberprotests have managed to bring about an important constitutional change. And ordinary Chinese citizens can circumvent the Great Firewall and evade other forms of police observation with surprising ease. If they know how.
Like its namesake, the Great Firewall consists of hundreds of individual fortifications spread out along a vulnerable frontier. At its core is a giant bank of computers and servers. Traffic generated by China's 162 million Internet users is routed through the shield, which checks all requested URLs against a blacklist of tens of thousands of Internet addresses. The list includes pages offering political information deemed dangerous by the government, like BBC News and Voice of America. Access to these sites is blocked (at least in theory), and when users attempt to view one of them, they are punished with an involuntary time-out lasting anywhere from 30 seconds to 30 minutes. Search engines are similarly restricted. If you enter the characters for "democracy" or "Tiananmen Square massacre" into Google.cn you will generally get zero results. This is a technological breakthrough for the Chinese government. Until recently, it could not interfere with the inner workings of search engines and instead blocked entire sites, not just individual pages of a site.
The Golden Shield hardware -- supplied by Cisco and other US companies -- is supplemented by human censors who are paid about $170 a month. They sit at screens in warehouse-like buildings run by the Public Security Bureau. These foot soldiers in China's information war monitor domestic news sites, erasing and editing politically sensitive stories. Some sites provide the censors with access so the authorities can alter content directly. Others get an email or a call when changes are required. Similar methods are applied to blogs. Sensitive entries are erased, and in the most egregious cases blogs are shut down altogether.
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