China's food industry - the business and the dangers

1. 噢弥陀佛
Eric
Wu

2. Table of Contents
1. Introduction to China’s Food Industry
2. Impact of China’s Food Scandals
3. Causes of China’s Food Industry Problems
4. Solutions for China’s Food Industry
5. How the World Views China
6. Impact on Singapore’s Food Industry

3. China’s Food Industry in Figures
500,000 large-scale food processing
companies, 350,000 small and
medium-sized enterprises (SMEs)
and over 20 million privately owned
businesses in the food retail line
(Xinhua, 2008)

4. China’s Food Industry in Figures
China’s agricultural industry makes
up 11% of China’s GDP from service,
construction and other industries

5. China’s Food Industry in Figures
3% of China’s Total Exports are Food
and Agricultural Products
(Starmass, 2007)

6. What do China Export?
Vegetables
Live Poultry Herbs &
Spices
Seafood
Fruits
Fruit
Juices
Meat Products Rice

7. Timeline of Food Scandals
2006 20102007 2008 2009
Source:
nytimes.com

8. Timeline of Food Scandals
2006 20102007 2008 2009
Source:
nytimes.com
Ginger
Excessive levels of pesticide, Aldicarb Sulphoxide
32,000 tons exported from China to USA
 No reported illnesses, recalled by FDA in time

9. Timeline of Food Scandals
2006 20102007 2008 2009
Source:
nytimes.com
Pet Food
Melamine in wheat gluten, an ingredient in the
pet food
Thousands of cats and dogs died or suffering from
renal failure

10. Timeline of Food Scandals
2006 20102007 2008 2009
Source:
nytimes.com
Cough Syrup
Glycerine substituted with diethylene glycol
Made into cough syrup in Panama
More than 300 died

11. Timeline of Food Scandals
2006 20102007 2008 2009
Source:
nytimes.com
Dumplings
Dumplings contaminated with insecticide
exported to Japan
Over a hundred people fell ill
Sabotage by worker who did not receive his pay

12. Timeline of Food Scandals
2006 20102007 2008 2009
Source:
nytimes.com
Milk
Infant formula and milk tainted with melamine
(Sanlu group)
6 babies died; thousands with kidney diseases
Many countries affected

13. Timeline of Food Scandals
2006 20102007 2008 2009
Source:
nytimes.com
Pork
Pigs fed with metabolism accelerator, Clenbuterol
Over 70 Chinese fell sick

14. Timeline of Food Scandals
2006 20102007 2008 2009
Source:
nytimes.com
Milk
‘Melamine milk’ in 2008 repackaged and
distributed in China
Lessons not learnt from 2008

15. Source:
Youtube.com

16. The Melamine Trail
Melamine

19. Filth
Pathogens
Pesticide Residues
Unsafe Additives
Labelling
Unlicensed
Manufacturers
Veterinary Drug

20. Impact of China’s Food Scandals

21. Impact of China’s Food Scandals
Trade &
Economy
Health
Social &
Political

22. Trade & Economy
Slow down in growth trade activity
0
5000
10000
15000
20000
25000
30000
35000
40000
1990 2000 2006 2007 2008
Value(Million$)
YearSource: World Trade Organization 2009

23. Companies Involved in the Food Scandals
Some companies had made huge losses while
other had to declare bankrupt
Loss of reputation
Loss of confidence from the investors

24. Health
Melamine
Swollen kidney; Kidney stones
Renal problems
Death (6 infants total)
Fake Eggs
Dementia (Memory Losses)
Most unforgivable when lives are involved
Problems may be chronic; long-term effects need
time to surface

25. Health
Melamine
Swollen kidney; Kidney stones
Renal problems
Death (6 infants total)
Fake Eggs
Dementia (Memory Losses)
Most unforgivable when lives are involved
Problems may be chronic; long-term effects need
time to surface

26. Social and Political
Melamine
Swollen kidney; Kidney stones
Renal problems
Death (6 infants total)
Fake Eggs
Dementia (Memory Losses)
Most unforgivable when lives are involved
Problems may be chronic; long-term effects need
time to surface

27. Social and Political
Internal
Loss of trust and credibility in Chinese
manufacturers by consumers, especially the
locals
Manufacturers forced to either find
alternative sources of raw materials or lose
confidence of consumers

28. Social and Political
External
Strained relationship with other
countries
Taiwan and China
US and China
UN called for a unified regulatory
agency against China food issues

30. Profit-driven manufacturers
 Social class differences
Inefficient inspection systems
Loopholes in food legislation and
labelling laws
Influences of communism
Causes of China’s Food Industry Problems

31. Causes: Profit Driven Manufacturers
Driven by poverty & lack of conscience
Ways to increase profit:
Substituting expensive ingredients with cheap
imitation chemicals
Increasing weights of food products by
adulteration
Dilution to increase overall product quantity
Using pesticides and growth hormones on plants
and animals to boost growth and yield.

32. Causes: Social Class Differences
Gap widening between rich and poor!
Between 1990 and 2005, China's Gini coefficient
rose from 0.257 to 0.447
A zero Gini coefficient represents perfect income equality and a score
of 1.0 indicates absolute income inequality

33. Causes: Social Class Differences

34. Causes: Social Class Differences
Vast differences between urban and rural
citizens
Don’t you know that it (Clenbuterol)
harms people?
Yes. But city people have free medical
care, so it’s no problem.

35. Causes: Inefficient Inspection Systems
Geographical size of China
Too big, cannot control
Unlicensed farmers and companies
No verification by authorities

36. Causes: Inefficient Inspection Systems
Fake certifications can hoodwink the officials
(e.g. cough syrup from china to panama)

37. Agricultural
Production
Production/
Processing
Import/
Export
Circulation/
Market
Catering
Service
MOH
• overall coordination
• food safety standards
• information disclosure
• crisis management
AQSIQ
(processed foods/additives)
• Production licensing
• Standards (production,
quality, labelling,
packaging)
• Inspection (product,
quality, production
facilities)
SAIC
•Inspection/
quarantine
•Import/exp
ort food
safety
incidents
•Joint
inspection
(product
quality)
•Joint
inspection
(product
quality)
•Anti-
counterfeiting
•Consumer
complaints
•Consumer
protection
(food safety
issues)
•Business licensing
•Trademark enforcement
(anti-counterfeiting)
•Consumer protection
•Competition environment
MOA
(agri- products including
live animals, feeds, etc)
•Agri-production
licensing
•Agri standards
•testing
•Animal
slaughter
•Live animals for
import/export
•‘green labelled’
agri-product in
supermarket MOFCOM
•Swine
slaughter
•Foreign
trade
issues
•Management of
retailer to ensure
they are
responsible for
food safety
SFDA
•Catering business
licensing
•Inspection of
hygienic conditions
in restaurants,
canteen, etc

38. Loopholes in Food Legislation and Labelling Laws
Not mandatory to list down country of origin
of ingredients
Law not robust enough
(e.g. distribution of adulterated glycerine)
Bribery/corruption

39. Loopholes in Food Legislation and Labelling Laws
Corruption perceptions index rank in selected countries 2009
Source: Transparency International
Vietnam
India
China
South Korea
Japan
Hong Kong
Singapore
New Zealand
Global rank out of 180 countries

40. Influences of Communism and ‘Wrong’ Mindsets
Lack of education
Communist thinking – production/profit is
priority
(e.g. excessive fertilisers and pesticides by
farmers)

41. Actions Taken to
Improve China’s
Food Safety

42. Improving Fundamental Problems on
China’s Food Safety
Bring all relevant government bodies under a
single body
Improve food safety throughout the entire
food chain
Developed vs. developing regions of China
Financial support
Global cooperation
Drawing experiences from other countries

43. Measures Taken by China
Tighten food safety through food processing
law
Implement standards and policies to
supervise farms and food processing units
Mandatory require food samples to be tested
for safety before exporting
Implement 2009 China’s Food
Safety Law

44. Food Safety Laws in China
Implemented by National People’s Congress
(NPC)
1982 Food Hygiene Law was amended in
1995
2009 China’s Food Safety Law (FSL)
Rampant food safety incidents in China
Aims to ensure China’s F&B industry by
providing safer products to its citizens and
export markets

45. Key Aspects of China’s FSL
Allocate responsibility of various regulatory
departments
Establish food safety commission
Establish risk assessment system
Stringent control on the production and use of
additives in food products
Mandatory standards and tests on food import and
export
Packaging materials and increase labeling
requirements
Increase legal liability and requirements of
private enterprise

46. • Ministry of
Agriculture
(MOA)
Agri-Products
& Livestock
•Administration
of Quality
Supervision,
Inspection and
Quarantine
(AQSIQ)
• Quality and
Technical
Supervision
Bureau (TSB)
• Entry-Exit
Inspection and
Quarantine
Bureau (CIQ)
Production/
processing
• State
Administration
of Industry and
Commerce
(SAIC)
Circulation
• State Food and
Drug
Administration
(SFDA)
Consumption
Ministry of Health

47. Involvement of Other Parties
Recommendations from United Nations to improve
China’s food safety with international norms
Setup a unified regulatory agency
Enforce modern food safety law
Educate and train employees in the food industry and
Establish standards
Setting up a new food testing centre with experts
from the United Sates
China-US Peace Food Inspection Centre
Tripartite food safety pact with Japan and South
Korea

48. Measures Taken by Other Countries
Increase their control on food products
imported from China especially dairy
products
Examine China’s products for any melamine and
melamine related compounds
Stringent requirements for food products imported
from China
They need to ensure the quality and safety of
food product before selling

49. Views on China’s Food Products
More domestic consumers switch to food
produced by other countries
Increase awareness of food safety
Series of food safety incidents related to Chinese
food
Poor reputation among consumers around
the world I don’t feel safe eating
these Chinese bamboos
Better don’t
eat these
China’s foods

50. Estimated Global Food Production
0
50
100
150
200
250
300
350
400
450
MillionTonesin2008/9
China India European Union USA
Source: FAO’s Food Outlook Global Market Analysis, 2009

51. But …
Alternate Global Food Producer

52. Source: Food and Drug Administration; U.S. International Trade Commission

53. of China’s Food Scandals
on Singapore
Impact

54. Impact of China’s Food Scandals on SG
1. Singapore’s imports from China
2. Measures taken by AVA on China’s products
3. Effect on local companies
4. Recall of food products in supermarkets
5. Singaporeans’ attitude towards China’s Food
Scandals
6. Effect on imports from China (do we have
more tests carried out on their products?)
7. Overall impact on Singapore’s exports

55. Singapore’s Imports from China
Main imports consist of vegetables, fruits,
seafood and live poultry
China is one of Singapore’s top sources for
vegetables
~ 120,000 tonnes in 2006

56. Measures Taken by AVA
Measures taken by AVA on China’s products:
Completed surveillance tests on > 3,500 milk
products; 500 of them were made in China.
Suspended the import and sale of all milk
and milk products from China.
Anyone found selling them can be sentenced
to three months' jail and fined S$10,000.

57. Effect on Local Companies
Effect on local companies
• Search for other milk sources from other countries
• Production line is affected
• Local companies suffered losses
Affected Companies are:
1) Condensed milk: Black and White Diamond
2) Liquid milk: Blancanube, Hotkid, Monmilk, Yili
3) Dairy cream: Gold Label, Topping Pride, Value Pride
4) Butter and ghee: Huo Guo Ye, Mu Ge, Phoon Huat
5) Milk candy: Milky Boy, Rabbit, The New Zealand Milk
6) Ice cream: Magnum, Meiji, Walls, Youcan

58. Recall of Food Products in Supermarkets
Famous ones include Magnum, Meiji, Walls
ice cream, Rabbit milk candy, Monmilk and
Yili Milk.
Impact on Singaporeans
Consumers are changing their diet, while
others refrain from drinking milk
Ban all China products

59. New Import Regulations
After the China Milk Scandal, import conditions must
be complied as follows:
1. Products must be produced by establishments
approved for export by the Chinese authorities,
2. Manufacturers are required to test each batch of
their raw materials and end products  No
Melamine
3. Health certificates with results of melamine tests
are to accompany consignments exported to
Singapore.

60. Overall Impact on Singapore’s Trade
 Must first understand what are Singapore’s
export
How much does the food industry contribute
to Singapore’s trade activities? Is it
significant?
 How has China’s scandals come to affect
Singapore’s exports, when they should have
been independent events?

61. Singapore’s Export
Market

62. Introduction of Singapore’s export
market
Dependence on export
Types of exports
Countries that Singapore trade with
Singapore’s Export

63. Singapore’s Export
Smallest and densely populated nation
Lack of natural resources
Absence of agriculture, livestock farming
90% of total food consumption is imported
from other countries
Import of raw materials is highly sought after
from neighboring countries.

64. Singapore’s Export Activities
One of SEA’s major trading and business hub
A direct source/distribution centre for many
food products
Re-exporting & Processing for value-added
products.
Global trade partners like India, Australia,
Japan, China, Indonesia, Malaysia, New
Zealand, etc.

65. Dependence on Export
Location adds as an advantage in trading
business.
Heavily dependent on international food
trade like re-exports activities.
Average growth of 10% from 1965 to 1979.
Contributed $268.9 billion to nation’s net
earnings in 2009.

66. Type of Exports
Key export commodities include:
Consumer electronics
Information technology products
Petroleum products
Pharmaceuticals
Chemicals
Processed Food

67. Statistics of Exports
Food exports have been rising in the past 5
years
63% of the food exports in 2003 went to the
Asian markets
700 food manufacturing companies
>50% of them caters mainly for the export
markets

68. Export Markets
The top five export markets were Japan,
Malaysia, Indonesia, China and Australia.
Within the European Union, the United
Kingdom was the largest export market for
Singapore food manufacturers, followed by
Finland, Belgium, Netherlands and Germany.
Exports include food, beverages and tobacco,
crude materials, animal and vegetable oils,
manufactured goods, etc.

69. Regulations on Import and Exports
Allows free import of food supplies and
products
 Highly regarded in food safety and hygiene
Two major government bodies of Food trade:
Agri – Food and Veterinary Authority of
Singapore (AVA)
Food Control Department

70. Singapore has always enjoyed
good reputation and high
standards of quality and safety
but….

71. Major Problem!
?

72. Singapore
China

73. USA
Europe
United Arab Emirates
Exports to USA: From
$176 to $338 million
Asia
No problems in
differentiating
Common Export Destinations

74. Differentiating SG from China
Singapore’s Food and Beverage Exports stand
firm in the world’s food trade
Statistics show exports jumped from $176
million to $338 million from Singapore to US
Increase in total domestic exports
(5.78%  9%)
Competitive edge lies in ‘Made in Singapore’

75. Differentiating SG from China
Hold and/or join more trade exhibitions e.g.
the Shanghai Expo
Diplomatic visits
Sustainable manufacturing
Reassuring labels: E.g. ‘Under the licence and
the strictest quality control of Pokka Corp.,
Japan’

76. Conclusion
 Problem lies with the deep-rooted
mindset the Chinese; need years to
reform
 China’s food industry is improving,
but sustainability is questionable

77. Conclusion
Help provided to China’s food industry
can only be till a certain extent; much is
needed from China’s own government
and food manufacturers
 India may take over China in food
production
 Singapore’s food industry
is also vulnerable to what
happens in China

78. END
Thank you!
Questions?
演讲完毕
再见了同志们！
还有问题吗？

79. Want some
White Rabbit candies
or
luncheon meat