China: Food Safety Highlights Challenges And Opportunities Of Current Reform Agenda

British Embassy Beijing

January 2014

Summary

China’s first policy document of 2014 emphasizes the need to improve food safety system. Growing public concern about this issue has made reform imperative. Implementation will be challenging but could generate significant opportunities for British business.

Detail

Growing public concern has made tackling China’s food safety problem a top priority for government. The importance of the issue was highlighted in documents published after the 3rd Plenum, and was given prominence in China’s first policy document of 2014, published in mid January.

Since 2008 when 54,000 infants were hospitalized and 6 died after drinking adulterated infant formula, China has been affected by food safety scandals: pesticide tainted vegetables, chemical tainted pork, old kitchen oil dredged from gutters used for cooking, cadmium tainted rice, and lamb injected with bacteria ridden pond water, to name just a few. According to a Pew Research Centre report, the proportion of Chinese who think food safety is a big problem has risen from 12% in 2008 to around 40%. 

Experts suggest that the main risks come from foodstuffs grown in polluted areas, the illicit use of chemicals, and adulteration. Rapid industrialization is the cause: in the recent past people knew the producers of their food and there were few opportunities for profit. But relationships between producer and consumer have become anonymous, complex. and unstable.

Although problems are often caused by negligence (or worse) by producers, public trust is highest in farmers and lowest in the authorities.  And it is the most vocal and able to mobilize who are most concerned: urban residents, the affluent and the young.

When a problem emerges government officials are sacked, more regulation introduced and draconian penalties threatened for non-compliance. The result is a complex web of regulation which tends to apply indiscriminately to companies no matter how large, how risky their activities, or what the potential impact on public health. The current equilibrium is that few companies try and comply. For example, a Shanghai based researcher estimates that the costs to a seller of steamed buns of complying with all the relevant regulation around food hygiene would mean that she would have to increase her price from 1.5 RMB per bun to 8 RMB, at which price she would not be able to sell any buns.

This also makes it harder for foreign companies to compete since they are unwilling to take the risk of non-compliance.

Government recognizes these problems and is committed to developing a system of proportionate regulation.  In the new draft food safety law the focus is on rationalizing the regulatory apparatus. Guangdong, China’s largest Provincial economy, has been encouraged to pilot ways of reducing the burden of regulation for SMES.

However, implementation of smart regulation is unclear. For example, the Guangdong Food and Drug Agency told us that while the new law would compel food businesses to insure against the risk of food safety problems, government would fix the price of insurance, breaking the market-mechanism that would encourage appropriate compliance.

Implications for the UK

Better targeting of regulation could substantially improve the business environment in a sector where the UK wishes to encourage greater investment. Indeed, the priorities for reform in this area capture many of the key points raised by the European Chamber of Business in their most recent position paper. 

This is also an area of regulation where the UK has substantial expertise. Chinese policy makers and experts are particularly interested in the UK experience of 3rd party accreditation, proportionate risk-management processes for SMEs, and use of public information and media to educate the public about risks and encourage business compliance. Sharing our experience could help policy makers implement the vision of giving a more important role to the market both in this sector and more broadly.

What we are doing and next steps

We are already sharing the UK experience to help Guangdong develop new regulations for SMEs. At the end of 2013,Geoff Ogle, Director Wales from the FSA presented on risk based regulation and compliance guidelines to policy makers, academics and the Guangdong FDA. This material is now being used to draft new, simpler, regulations and guidance for SMEs.

Next is a visit to the UK by a delegation from the Guangdong FDA to deepen their understanding. Sharing Defra’s experience of working with farmers could help China to tackle the main sources of food safety scandals: pollution, adulteration and use of chemicals.

Disclaimer

The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.

Countries: China
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