China's Wen Promotes Overhauls

(Wall Street Journal)

By Jason Dean


TIANJIN, China -- Chinese Premier Wen Jiabao defended his government's handling of a scandal over tainted milk products and promised to fix the country's dairy industry as lawyers advising some of the scandal's victims said they have been cautioned by local officials to limit their activities.


Speaking at the World Economic Forum in the Chinese port city of Tianjin, Mr. Wen said the dairy crisis "exposed the fact that there are still many problems in our supervision of production, and the government has responsibility." He said the incident served as an "alert" for the whole country.


Mr. Wen also said there had been no effort to conceal the problem, despite evidence that the company at the center of the scandal worked with local government officials to keep it from becoming public for weeks or even months.


"When China discovered this problem, there wasn't the slightest coverup," Mr. Wen said in response to a question from the forum's leader after his speech. "We faced this frankly, and moreover bravely handled its resolution."


Mr. Wen may have been referring to the response of China's central government, which has said that it moved quickly to deal with the problem after first learning of it on Sept. 8. The Ministry of Health announced a recall of Shijiazhuang Sanlu Group Co.'s milk powder three days later.


But the government's own reconstruction of events shows that officials at Sanlu had already received reports late last year that its milk powder was making infants sick, and knew by early August that the product was tainted with the industrial chemical melamine, which can cause kidney problems. Fonterra Co-operative Group Ltd., the New Zealand dairy company that owns 43% of Sanlu, has said that it pushed for a public recall immediately after being informed of the problem Aug. 2, but that officials in Shijiazhuang, the provincial capital where Sanlu is based, rebuffed it.


Melamine has since been found in a wide range of Chinese dairy products, although Sanlu's products have had the highest levels. At least three infants have died after consuming tainted formula and more than 54,000 have been sickened with kidney disease, according to the government.


Lawyers across China have been advising victims' families on possible lawsuits against Sanlu, and some of the lawyers said they are being pressured by local officials to curtail or end their work.


"I heard many lawyers have faced this pressure to abandon their efforts," Li Fangping, a Beijing-based lawyer who has consulted with affected families, said Sunday. Mr. Li said he was contacted by Beijing's municipal justice department Sunday and told "you should trust the [Communist] party and the government will solve this problem well." Officials at the justice department couldn't be reached for comment.


Lawyers involved in the case in two other cities in the central province of Henan and the western province of Gansu reported receiving similar pressure from local officials. A fourth lawyer said he hadn't received any official pressure, and one other lawyer declined to comment, saying "it is not convenient to tell you anything about this issue."


The melamine scare has prompted recalls and bans in several countries of Chinese dairy imports or goods made with Chinese ingredients that could be contaminated. During the weekend, Indonesia's Ministry of Health said its tests had found melamine in 12 types of products sold there, including Oreo-brand wafer sticks, M&M's and Snickers candy bars. The Oreo snacks were made by an Indonesian unit of Nabisco Food (Suzhou) Co., and the candies were made by Mars Food Co. Ltd., Beijing.


Nabisco parent company Kraft Foods Inc., Northfield, Ill., said Sunday that it "supports the Indonesian government's cautionary measure" but that the milk ingredients in the Oreo wafer products sold in Indonesia don't come from China.


"It is a very unusual finding," said Nancy Daigler, Kraft senior vice president of corporate affairs. "We are trying to understand the facts."


Mars Inc. officials in the U.S. couldn't immediately be reached for comment. A statement on the company's Web site didn't mention Indonesia's action but said independent tests of milk powders from businesses that supply ingredients to its Mars China factory didn't detect any melamine. The statement also said testing by Hong Kong, Thailand and South Korea had cleared its products.


In his speech Saturday, Mr. Wen said the scandal also shows the need for strengthened "corporate morality" in China, as well as tighter government regulation. "We will put forward a plan to rapidly revitalize the dairy industry," he said, adding that the government intends to make all Chinese manufactured goods products "that Chinese people can trust, and that the people of the world can trust."


Mr. Wen also reassured the assembled business leaders and others attending the economic forum that China will continue its three-decade-old program of economic overhauls and opening. And he predicted China would be able to maintain rapid growth despite the U.S. financial crisis and a global economic slowdown.


Many foreign executives in China have expressed concern in recent months about China's attitude toward foreign business, after an antiforeign backlash over criticism of China's Tibet policies and a severe tightening of visa approvals by Beijing in the run-up to the Olympics this summer.


Mr. Wen didn't address those issues specifically but said China "will deepen foreign-related economic structural reform; improve foreign-related economic laws, regulations and policies; expand market access; strengthen the protection of intellectual property rights and provide a better environment for foreign businesses in China."


While Mr. Wen's pledges weren't new, they served to assure investors the government remains committed to these goals.  9-29-08



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