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Comment

Beijing Olympic Games clean-up a dirty business

10-Nov-2008

This year’s Beijing Olympic Games may have been good for China’s public image but the smooth running of the event was built on multiple state-prompted sacrifices and the food ingredients industry was one of the lambs that copped it in the neck for ‘the greater good’.

It’s a sacrifice that is still being felt by the global food, supplements, ingredients and raw materials industries as China’s supply of key nutrients has not yet returned to pre-Games levels, and may not do so for some time.

Foreign Affairs magazine estimates it could be 5-10 years before the damage is undone.

In and around Beijing, as well as in other parts of the country, ingredients and raw materials suppliers were shut down or had their operations severely curtailed as the Chinese government sought to smother any activity that had the faintest possibility of attracting negative publicity.

The Chinese feared the quality of their output was not up to scratch, and the environmental measures employed, not adequate, so out came a carpet as big as the Great Wall of China, under which everything was swept.

Major suppliers such as the Beneo Group, Gee Lawson and DSM have all been affected by the situation and at the Health Ingredients Europe trade show in Paris last week, many suppliers noted disruptions in supply that are as yet unresolved.

Some have noted a converse side-effect is the very reduction in quality the Chinese government has tried to avoid, as the increased price has attracted inferior and counterfeit material from fringe players seeking a piece of the high-margin pie.

Closure

As it stands, many facilities remain closed, some of which provided big volumes of vitamins and minerals and botanicals and other nutrients like protein isolates, glucosamine, chondroitin and CoEnzymeQ10 to customers all around the world.

In China’s hyper-competitive economy, temporary closure appears to be something more final in many cases, with Western suppliers noting many raw materials suppliers have not as yet reopened for business.

As Gee Lawson managing director, Jonathan Shorts, told NutraIngredients.com recently, supply contraction has given rise to cases such as that of vitamin B12, where price has surged from €2000/kg 12 months ago to €3500/kg.

Those buying these ingredients have been forced to look elsewhere and the crimped supply has led to global spot price increases in some cases as a result.

This year’s melamine break-out indicates the authorities were right to be concerned, and it appears there was prior Olympic Games knowledge of melamine this time around.

Yet in its drive to present a squeaky clean image to the world this dangerous contamination was concealed by the Chinese government, a decision that cost the lives of four infants and severe health problems for about 50,000 others.

Not cheap, not cheerful

The irony is that China has done so much to improve quality in recent years. The Chinese State Drug Administration (SDA) had put Good Manufacturing Practises (GMP) programmes in place; it and other arms of the Chinese government had worked with the US Food and Drug Administration (FDA) and other international agencies to better police output and improve trade.

And it seemed to work as the adage that Chinese material was cheap and cheerful was replaced by an acknowledgement that Chinese material had in many cases become not only cheaper than the West’s, but better too.

But the Olympic Games was a big moment for the Chinese and they were not prepared to take any chances.

Given the suppression of the melamine problem they may feel vindicated. Yes there were tragic deaths, and administrative heads have rolled since, but China succeeded in keeping it under wraps.

This however does not necessarily translate into a wider threat from the ingredients industry. Melamine is far removed from the run of the mill lead and steroid contamination issues that are more prevalent among ingredient suppliers the world over, and with that in mind, the gap between the genuine threat presented by Chinese suppliers and the perceived threat only grows.

Paranoid destruction

There is a name given to such gaps in perception: paranoia. China’s paranoid act has damaged an industry that had made great strides forward.

Which is a shame, for those whose livelihoods have been directly affected in the form of lost incomes and jobs in China; for local and international business partners that in some cases have been left high and dry without necessary ingredients for formulations and sell-on contracts; and for the ongoing stability of a global ingredients market that has become increasingly reliant on Chinese output.

Sometimes it is easy to forget China is a Communist state given the capitalism model it has adopted to drive its economic growth.

Without suggesting China is uniquely problematic, those doing business with Chinese suppliers may do well to remember the relationship between state and business is a little different on the Sino peninsula and make contingency plans for when that difference is manifested, as happened this summer.

Shane Starling is the editor of NutraIngredients.com. If you would like comment on this article email shane.starling'at'decisionnews.com.

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