Asia acts to contain China's tainted milk

China's milk scandal is rippling outward in Asia, ensnaring multinational food companies that manufacture in China and raising fresh doubts over the safety of global food supply chains.

Many of China's neighbors have already banned or recalled imported dairy products suspected of containing the chemical melamine. Tainted Chinese milk formula is blamed for the deaths of four babies and for sickening tens of thousands in a scandal that was only exposed last month after being swept under the carpet during the Beijing Olympics.

On Tuesday, authorities said that 27 people had been arrested so far in connection with the case, as Prime Minister Wen Jiabao toured dairy companies in Anhui Province and told them to improve their standards, state news agency Xinhua reported. Tests posted Wednesday on the national food safety administration's website showed 31 additional samples of milk powder were tainted, according to the Associated Press.

In recent days, international food companies have yanked branded products such as Lipton's milk tea and Cadbury chocolates from supermarket shelves across Asia as local inspectors step up tests of dairy products that may contain melamine, which is normally used for plastics and fertilizers. On Wednesday Hong Kong announced it had found melamine in Japanese-brand cheesecake made in China, and Australia recalled a popular line of cookies.

Many of the recalled products contain only small amounts of powdered milk from China, which is a net importer of dairy products. A handful of babies have reportedly fallen ill in Hong Kong after consuming melamine-laced milk, but elsewhere the recalls have been largely preemptive.

In Thailand, government inspectors have impounded 80 tons of Chinese milk powder, though an importer has denied any contamination. The issue resonates strongly in Taiwan, whose government was elected in March on a platform of closer commercial ties with China. Premier Liu Chao-shiuan has called on China to apologize for its tainted products.

From pet food and lead-painted toys to toothpaste and seafood, China has weathered previous storms over the safety of its exports. Adulterated baby formula sold under counterfeit brands has also been blamed for past deaths. This time, dairy distributors added melamine to milk to disguise its low quality after it was diluted. The same chemical was also found in pet food that killed dogs and cats in the US.

Given the size of China's domestic market and its export prowess, these scares, while alarming, may exaggerate the scale of the problem in comparison to other developing countries that also cut corners in production, says Toby Deforges, CEO of Engage, a strategic consultancy in Bangkok that has advised dairy producers in China.

Nor would new laws, as proposed by some experts, necessarily prevent a repeat, as long as unscrupulous producers know how to evade the rules. "The letter of the law in Asia is generally very strict.... [But] there's not much point in having strong legislation if you don't have strong policing that applies consistently across the industry," says Mr. Deforges.

China swiftly fired several government and company officials in the city where the contamination was discovered and vowed to overhaul its national controls on food. But many are skeptical, as similar promised crackdowns in the wake of previous cases failed to improve oversight, says Paul French, founder of Access Asia, a research consultancy in Shanghai.

Adding to these concerns, Sanlu, the disgraced milk company at the center of the latest scandal, is a state-owned joint venture with Fonterra, a New Zealand dairy cooperative.

For Chinese consumers, that should be a sign of reassurance, as foreign brands are seen as more stringent in following safety standards. But Fonterra opted to stay quiet after the contamination was discovered, says Mr. French.

Now middle-class Chinese are questioning the reliability of foreign-branded goods that are produced locally and sold at higher prices than Chinese products. "For those who can afford it, they're going to supermarkets and asking staff if products are 100 percent imported or a foreign name that's made here," he says.

For other multinational food companies, the latest wave of recalls is a stark reminder that underhand practices in poorly regulated markets like China can damage their brands, says Chris Bruton, director of Dataconsult, a consultancy in Bangkok.

Sourcing locally puts the onus on foreign companies to properly screen their suppliers, he says. "There's a premium on quality and if they overlook that quality they only have themselves to blame."

Since the scandal broke, there has been some confusion over tests by food inspectors that show traces of the chemical in products but don't necessarily indicate tainted milk supplies.

Authorities in Hong Kong said Tuesday that two samples of Cadbury chocolate produced in China contained tiny amounts of melamine but were fit for human consumption.

Singapore has sought to downplay fears over the risk of consuming three Chinese products it has recalled. On its website, the Agri-Food and Veterinary Authority estimated that a child could eat 23.5 pieces of White Rabbit Creamy Candy daily over a lifetime and still be within US recommendations for tolerable intake of melamine.