Risk regulation in China

Local political power poses a formidable challenge to Beijing's efforts to enforce regulation...and shore up popular support for the regime

When the melamine milk scandal hit China in 2008, it was the latest and worst in a long line of food scandals. From the Sudan I scandal to fast food chain Kentucky Fried Chicken’s use of Magnesium Trisilicate, Chinese citizens have seen more than their fair share of unsafe food practices.

What stood out in the melamine case was the fact that executives at Sanlu, the formula milk manufacturers, had known about the dangers their products posed for months before the scandal broke. China’s top leaders had to step in because an investigation found that local officials where Sanlu was based were also aware of the milk’s harmful effects, but had been paid off to keep mum about it.

“Generally speaking, he warned that if China did not do anything or did not do a good job about ensuring food safety, the government’s legitimacy of rule will be questioned,” says Yang Dali, Professor of Political Science, University of Chicago on Chinese president Xi Jinping’s admonition of corrupt officials and food companies. “If Chinese parents are rushing to Hong Kong and Singapore to buy infant formula milk, it speaks volumes about the reality as opposed to whatever great plans the central government might have.”

Bad medicine

Yang was speaking at the recent Singapore Management Universty School of Social Sciences Ho Bee Research Seminar, “The Politics of Risk Regulation in China”. Yang related the case of Zheng Xiaoyu, the former director of the State Food and Drug Administration (SFDA) who was executed in 2007 for corruption and approving substandard medicines which turned out to be lethal.

“Every city and county wants to have their companies generating jobs for the local population,” explains Yang of the problems Zheng faced in trying to implement standardised national standards for drug makers. “For cities with drug-making factories, if you take away their standard-making powers, you also make it harder for local governments to approve factories.If you standardised national standards, you might have to close down certain factories.

“The SFDA had the status of a bureau, but provincial leaders are ranked at the ministerial level. If Zheng threatened to close down a factory, the factory owners would go to the municipal government for help. The mayor of a city would be ranked at the vice-ministerial level – higher than Zheng – so how do you regulate with no power?”

"Generally speaking, President Xi warned that if China did not do a good job about ensuring food safety, the government’s legitimacy of rule will be questioned."

To get round that problem, Zheng let local authorities keep their existing powers but made sure all future approvals came from him. That opened up opportunities for corruption – Zheng was eventually convicted for taking bribes amounting to about 6 million RMB (about US$850,000) – and the SFDA proceeded to approve over 10,000 drugs annually compared to about 100 by the Food and Drug Administration (FDA) in the U.S., on which the SFDA was modeled.

What led to national leaders cracking down on Zheng was when people started falling sick. Some of the cases involved traditional Chinese medicine that is traditionally taken orally.

“Because of price regulations, if you get traditional Chinese medicine over the counter, the drug seller doesn’t make a lot of money,” Yang explains. “But there is one way to make more money – turn this medicine into injectables. As a result, a lot of the traditional Chinese medicine was made into injectables without any testing. People started falling sick because these medicines aren’t meant to be injectable.

“Between 2005 and 2006, there were so many problems regarding drugs and medicines that it wasn’t just the reputation of the SFDA that was on the line; it was the reputation of the Chinese government as well. Eventually, the Chinese government found Zheng Xiaoyu to be not just corrupt but also negligent. The Chinese Premier at that time, Wen Jiabao, was so mad that he made sure that Zheng was executed.”

Regulating regulation

Yang also highlighted the incentives for local officials to hush up unflattering reports about their districts: promotion to more senior posts within the Communist Party leadership. Faced with such barriers, would Nobel Prize winner Amartya Sen’s argument for a free press – in conjunction with widespread democracy – be an effective early warning system to alert national leaders before people are hurt in large numbers?

“In each of the incidents,” Yang recounts, “I could pinpoint when the reporters were ready to report what was happening but they were not given the opportunity. If they were allowed to report on these developments more freely, it would have received more attention; there would be fewer incidents of people getting sick. In that sense, I could say with certainty that the lack of a freer press in China contributed to the magnitude of the problems.”

However, he adds, “It’s not just about a free press either – Sierra Leone has the freest press in the world! One of the biggest differences between China and the U.S., for example, is the legal system. Regulation happens because the consumer is willing to sue, and even though society may be collectively unhappy with the legal costs, they are happy to have that avenue for redress. In China, it’s generally not possible for someone to do that.

“As a society, you can’t expect the government to deal with this alone because it doesn’t have all the information. The ideal system would involve enlisting participation of those with the information, and that is the people. This is a participatory model of government, and citizens can go to the courts. We are unlikely to see a U.S.-style system in China, but change is coming in China.”

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