When Consumers Lose Confidence. Beijing Acts

Wednesday, March 13, 2013 4:56

While the news of 6,000 pigs floating in Shanghai’s water ways is front and center this week, the issue of consumer confidence has been a growing for some time.  Particularly since the 2008 milk scandal.

It is an issue that has become an economic one as Chinese residents, whose spending habits have grown in the last few years, look to identify and acquire safe products in mass. which, in the case of milk powder, has resulted in one of the largest diverted product supply chains known to man.  To the point where relations between the mainland and HK have grown strained, and a new law has gone into place that prevents the exportation of more than 2 tins of milk powder from HK.

Seriously, it has come to this.  (Pictures of announcement above).

Which is something that for me underlies the real risks of the “Aporkalypse” (Thanks Andrew).  The economic impact of consumers who are going to (once again) lose confidence in domestic products.  As well as foreign products produced in China.  Psychologically this has the potential to reverberate through the wider economy as consumers look to find safe sources of yet another product.  A product that is the primary meat of choice for Chinese, and is a huge economy in and of itself.

What will Beijing “do” about it. That remains to be seen.

Some have said that promoting FDA to a ministry, or super ministry, is the answer. I disagree based partly on what I have seen from the EPA, which reached ministry status 5 years ago, but also from the fact that food safety in China has nearly 20 agencies involved (only 5-6 are really needed) with several being the super DUPER ministries.  for example, NDRC, MOFCOM, and PSB.

For me, this will come to recalibration of a model that is defragmented, decentralized, and poorly enforced.  It will require moving away from small farms, while managing the needs of small farmers, so that consistency in process, quality control, and testing can occur.  At scale.

Most importantly though.  It will require transparency.  Internally, it needs to be a system that identifies and mitigates a problem before it floats down the river, explodes in teh fields, or sends 300,000 kids to the hospital.  Externally, it needs to be a system that instills confidence in China’s consumers.

For me, to truly fix this problem at the systemic level it is going to take a recalibration of the food economy..

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5 Responses to “When Consumers Lose Confidence. Beijing Acts”

  1. Andrew says:

    March 15th, 2013 at 12:17 am

    Hey Richard, I’m one of Phillip Stalley’s students that you spoke to at Fudan University last summer. I’ve been following your blog. I read an earlier post in which you argued that a major problem with China’s food system from a product safety standpoint is that small farms are the still the norm and are tough to regulate. A recent article in a startup online publication called FoodPolitic.org caught my eye (the link is posted below).

    It reports on plans currently in the works to build a massive pork producing operation in China. How do you think we should interpret this? Is it a sign that China’s food system is moving in the right direction in the sense that it represents a transition to a model in which enforcing safety regulations is practicable? But if that’s the case, why is it that advocates of safer, more ethical, more sustainable food systems in the U.S. and other industrialized countries argue that we should move away from the factory farming model and towards smaller, local farms? Your comments would be very much appreciated.

    http://www.foodpolitic.com/china-adds-swine-to-growing-population-new-industrial-farm-will-raise-1-million/

  2. Rich says:

    March 15th, 2013 at 6:43 am

    hi Andrew.

    Thanks for checking in! Are you back in the US now?

    that story scares me. 1 million pigs on 12 acres? wonder how many stories that building will have to be on.. can’t imagine the amount of manure that it will create.

    How to interpret. Honestly speaking, I am not really sure because like everything in China there are multiple needs to be considered. Why the draw for industrial farms in China? the theoretical ability to more safely monitor the pigs and ensure consistency in their development and quality. It would also remove the many layers of consolidators that exist. consolidators who are the largest actors in nearly every food scandal in China… and are suspect 1 in the recent pig float.

    BUT.. I would also argue that (from what I have seen), industrialization is likely to have problems as well. Problems of scale = risk or failure at a larger scale… can you imagine a million pigs with antibiotic resistance? guh….

    More than anything, what china needs is a holistic look at the system. Beyond the farm, and consolidators, you have a system that is largely hidden from public view and regularly fails to report problems until 300,000 kids go to the hospital, watermelons bursting in the fields are caught on camera, or pigs float down river. The cold chain lacks integrity, and the level of cross contamination in meats is shocking depending on the provider.

    Lots and lots of issues with many consumers feeling uneasy about purchasing anything made in China.

    Hope all is well and feel free to follow up.
    RB

  3. Dan says:

    March 17th, 2013 at 3:43 pm

    I completely agree.  Real change is going to take time and need to be systemic.  No way will turning things over to a super-duper agency come close to curing all ills.  

  4. Ben Chen says:

    June 22nd, 2013 at 6:33 am

    Professor, the uniqueness of small holder / land ownership issue makes China so uniquely different than United States. Isn’t there a lot of challenge comes with industrial agriculture that required complicated monitoring and buy ins?

    How are people in Shanghai approaching this?

  5. Rich says:

    June 23rd, 2013 at 7:33 am

    Ben,

    Yes, and I briefly mentioned this above, but should be said that Beijing is more focused on this than in Shanghai.

    Where Shanghai is getting interesting is that the major retail chains (WM, TESCO, Lotus, etc) are all developing large farmer programs to help bring up the masses. Shanghai’s farms are still small on average, but in Chongming Nanhui, and Songjiang you are seeing investment into larger farms (Tony’s farm being an example)