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Milk Scandal Renews Fears Of 'Made In China' Label

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Milk Scandal Renews Fears Of 'Made In China' Label

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Milk Scandal Renews Fears Of 'Made In China' Label

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ALEX CHADWICK, host: It's Day to Day from NPR News, I'm Alex Chadwick.

MADELEINE BRAND, host:

And I'm Madeleine Brand. China has promised a complete overhaul of its dairy industry. That's after milk that was contaminated with melamine killed at least four children and sickened more than 50,000.

CHADWICK: The overhaul though, it has not come soon enough for many multinational companies. They've recalled melamine-tainted products from China. So now the issue for China is how long will its made in China brand need to recover. From Shanghai, here's NPR's Louisa Lim.

LOUISA LIM: When Richard Nixon visited China in 1972, then-Premier Zhou Enlai gave him two pandas as a state gift, along with a bag of White Rabbit candies. The white, chewy sweeties were a homegrown brand, something China could be proud of. Now, its sweeties laced with melamine, this natural brand has been badly tarnished. White Rabbit candies are being recalled from shelves around the world along with a host of other products - yogurt drinks, milk tea, chocolate and cookies, all tainted with the industrial chemical. Jeremy Haft, author of "All the Tea in China" says this reawakens bad memories.

Mr. JEREMY HAFT (Author, "All the Tea in China"): For most Americans, we're in a position of deja vu. Suddenly people are recalling the toothpaste, the tires, the toys, the poisoned batches of heparin, and the Chinese brand for quality and reliability has been tarnished.

LIM: This scandal has toppled national icons, including Yili, an Olympic sponsor and one of the country's biggest dairies. One survey by Interbranch shows the game course have an improvement in the perception overseas of the made in China brand. But Jonathan Chajet, who conducted the research, says those gains have been wiped out.

Mr. JONATHAN CHAJET (Researcher): Immediately following the Olympics there was quite an improvement of people's perceptions of China. As soon as the milk scandal hit, the data showed the levels went back to immediately almost before the Olympics.

LIM: Even worse for brand China, this was not the first scandal over milk powder. Four years ago more than a dozen Chinese babies died from malnutrition after drinking fake formula with no nutritional value. Even that wasn't enough to clean up the dairy industry, says dairy consultant Edward Zhang.

Mr. EDWARD ZHANG (Dairy Consultant): The government did not take continued action. They have their action immediately. But after that time, I think, most of the action will disappear.

LIM: In a high-level Cabinet meeting, the government acknowledged the dairy industry was chaotic and vowed more oversight. Thirty-two people have been arrested so far. But author Jeremy Haft says such action may not necessarily work.

Mr. HAFT: The supply chain tends to be three to four times longer than a typical supply chain in the U.S. And every player adds risks. It adds input costs. It adds turnaround time. And many of those players are middlemen who are very difficult to regulate and police. And so what we're having here with milk is a symptom of a deeper problem that cannot be policed away by the authorities.

LIM: The human toll has been high. Four deaths announced so far, and 54,000 sick infants crowding China's hospitals according to the most recent figures. Even this, Jonathan Chajet believes, might not bring about real change.

Mr. CHAJET: As dark as this sounds, you know, I'm not sure that enough babies died in this case for there to be enough public outrage that there will be mass change that perhaps, you know, Westerners might look towards.

LIM: This scandal could cost China's dairy industry as much as $4 billion in lost sales, according to one estimate. It will also damage Chinese brands struggling to make headway overseas. Author Jeremy Haft says the fallout will be long-lasting.

Mr. HAFT: My personal belief is that it could take a generation or more for Chinese industries to truly sort themselves out, to truly integrate and to truly mitigate the tremendous risks that you encounter in doing manufacturing on the ground in China.

LIM: And the bad news is this: against the backdrop of global financial turmoil as the export environment becomes more difficult, pressures will grow on struggling Chinese businesses to cut corners to squeeze out more profit. The milk powder scandal is the worst so far to taint the "made in China" brand, but it's unlikely to be the last. Louisa Lim, NPR News, Shanghai.

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