China begins PR drive after spate of recalls

/ Source: The Associated Press

Stung by product safety scandals, Beijing is waging its own version of a corporate public relations campaign to repair China’s battered brand name, an effort punctuated by the execution of a corrupt former drug regulator.

This week, Beijing’s propaganda machine trumpeted decisions to tighten standards for toothpaste makers and food processors and to create a symbol to attach to food exports that pass quality inspections.

But can Beijing restore consumer trust after a series of recalls and warnings in the United States, Latin America and Asia targeting faulty tires, toys containing lead, drug-laced seafood, tainted pet food ingredients, toxic toothpaste and other hazardous goods?

Yes, though not yet, analysts say. They say Beijing faces a long struggle to assure consumers it has made basic changes needed to enforce safety in its sprawling export industries.

“They’ve taken very strong public stances,” said William Hess, chief China analyst for the consulting firm Global Insight. “But in reality people are very skeptical of the overall capabilities of the regulatory regime. So I think more quantifiable steps are necessary in that area before people’s confidence will be restored.”

Exports are a cornerstone of China’s sizzling economy. Exports in June surged 27.1 percent compared with the same month last year to $103.2 billion. That boosted total exports for the first half of this year to $547.6 billion, a 27.6 increase over the year-earlier period.

The flurry of incidents, some fatal, have forced China to act like a company in the midst of crisis management as it tries to preserve access to critical export markets.

The range of goods involved is so broad that officials complain the incidents are tarnishing the image of all Chinese exports, most of which have had no problems.

“Food security problems have impeded Chinese agri-products and food many times in international trade, and damaged our national credibility and image,” said Sun Xianze, an official of the State Food and Drug Administration, quoted by the China Daily newspaper.

The repercussions could go far beyond China. Retailers count on Chinese factories for low-cost appliances, shoes and other goods. Food processors and manufacturers use Chinese components, ingredients and other materials. For many items, industry experts say, no alternative sources can match the level of China’s output.

Demand for raw materials to produce these exports has fueled the global boom in commodities prices. Copper prices, for example, are up 26 percent since the start of the year. Even a mild slowdown in China’s powerful export machine could hurt commodities suppliers like Chile, Australia and Brazil.

Beijing’s mounting urgency about proving its commitment to safety has led to a striking level of candor about failings in the regulatory systems of the normally secretive communist government.

On Friday, a deputy health minister called attention to the chaotic food supervision system, in which six agencies monitor farming, processing and exports, blurring responsibility and sometimes allowing violators to escape detection.

“The food issue involves cooperation among many departments. This is very important,” Wang Longde said at a news conference.

Such openness has proven critical for companies that are able to recover from product liability incidents, said Harvey Hoffenberg, president of Propulsion LLC, a Connecticut-based marketing firm.

Hoffenberg pointed to Johnson & Johnson’s response to the fatal 1982 Tylenol tampering scare, widely seen as a model for how best to cope with disasters. The company’s chief executive appeared on television early in the crisis and it recalled millions of bottles of pain-reliever tablets and introduced tamperproof packaging. Tylenol emerged with a reputation for safety and reliability.

“Just being quick to respond isn’t the only thing. It has to have a real foundation for change,” Hoffenberg said. “Consumers do forget easily sometimes, but only when they’re comfortable.”

It isn’t clear whether Beijing has turned to outside public relations firms for help in crisis management. The Foreign Ministry said it had no such arrangements, while the Commerce Ministry and the cabinet press office did not respond to questions. Foreign firms including Hill & Knowlton, Ogily & Mather, APCO and Manning Selvage & Lee contacted Friday said they had not been hired.

President Hu Jintao’s government has a history of overhauling portions of its bureaucracy in response to crises that have made waves for China abroad.

Beijing shook up its public health system and created a nationwide disease-monitoring network after criticism of its sluggish response to the 2003 outbreak of severe acute respiratory syndrome.

Since the first product safety cases emerged in early May, China has tried to show its responsiveness by publicizing the closure of substandard food processing plants, a ban on unproven medications and the seizure of fake blood protein in hospitals.

The tempo picked up this week. The government banned the use of diethylene glycol in toothpaste after U.S. authorities seized thousands of tubes tainted with the chemical, used in antifreeze. Thousands of small food processing plants were warned they would be shut down if they fail to meet hygiene standards. Authorities announced a special food inspection system for 2008 Summer Olympics in Beijing.

On Tuesday, the government took its most drastic step yet, executing Zheng Xiaoyu, a former director of the State Food and Drug Administration, on charges that he took bribes to approve untested medicines.

Zheng’s case was unrelated to the latest scandals. But his arrest in 2005 followed a string of fatalities blamed on improperly tested drugs, including an antibiotic that killed 10 patients. The government launched a review of 170,000 drug licenses granted while Zheng was regulator.

“China can’t expect an overnight change, no matter how they react,” Hoffenberg said. And as for foreign consumers, he said, “it’s yet to be seen whether executing somebody is a positive or a negative.”