The Chinese are intent on surpassing the United States as the world’s biggest economy. And they are not above rigging the game to get them there.
In July agents of the Shanghai Food and Drug Administration raided a food processing plant owned by Husi Foods, a subsidiary of the U.S.-based OSI Group. Alleging the company had engaged in unsafe practices by selling expired, repackaged meat to its customers – which include Chinese outlets of chain restaurants including McDonald’s, Burger King, and Starbucks, the inspectors detained and then arrested six employees.
On the surface the raid was a portrayed as a step forward for consumer safety in a country that lacks the processes and procedures utilized by the American food industry. In reality it may have been more about weakening Chinese consumer confidence in U.S.-affiliated firms, thus establishing a kind of marketplace equilibrium with domestic firms that do not inspire as much trust.
It’s a bad situation made worse by the lack of a fully-formed system of economic rights and legal protections like that which exists in the United States. Under the pretense of keeping food safe the SFDA targeted a U.S.-owned plant and its workers in an attempt to convince people through the media that the agency was doing its job.
In fact this is a country where, despite its great leap forward out of the bowels of Marxist economic theory, the laws are not clear, the regulatory regime is anything but transparent, and nothing is applied equally. The rule of law, at least by U.S. standards, is an elusive thing – a fact the SFDA exploits at great cost not just for American-owned firms but to the entire Chinese economy, including both domestic and international firms.
By well-established U.S. standards the meat in question posed no food safety threat, despite having passed its expiration date, because it was frozen. The situation is little different from what is commonplace in America, where people by fresh meats at the local grocery a week before its “no sale past” date and freeze it for six months before thawing it out for a barbecue.
The cuts of meat involved may not be of the highest quality by that point – as reflected in taste, texture, or overall appearance but, as the American Meat Institute – the industry trade group – acknowledges on its web site, it is far from being, per se, unsafe. Things would be different if the meat products coming out of the Husi facility were connected to the outbreak of any food-related illnesses but nothing has been reported.
It is fair, even appropriate to suggest that any fault lies not with the Husi organization but with the Shanghai FDA, which is almost certainly engaged in unfair and selective enforcement of food safety regulations. Chinese President Xi Jinping has made a priority of anti-corruption efforts. To satisfy the central government, local and provincial officials have made it their business to take high-profile actions to convey the appearance they are following his lead. Shanghai has a history of being among China’s most corrupt cities but targeting unfairly the subsidiary of a U.S.-owned company amounts to little more than misdirection. They can at the same time deflect attention from the rampant political corruption, blot the reputation of a foreign-owned company competing in the Chinese marketplace, and claim action, however falsely, to be improving China’s food safety regime.
China has been widely criticized for using its antimonopoly law to pressure foreign businesses. As noted by the Wall Street Journal, the Chinese government has launched numerous probes, “but they haven’t always disclosed what they are investigating.”
All this is a deterrent to foreign investment in the world’s most populist country, investment that is sorely needed if the material demands of the growing middle class are to be met. Issues involving food safety should be addressed by the government; issues of food quality should be, and generally are address in the marketplace. Repackaging meat is acceptable in the United States even under strict USDA standards. The issue has only arisen in Shanghai, despite OSI operations in seven other locations in China, all of which were cleared by Chinese FDA officials within 48 hours of the raid on the Husi plant.
As part of an unfortunate pattern of behavior in China, U.S. businesses are being targeted in a high profile manner, further straining U.S.-China relations and creating a chilling effect on foreign investment into the country, which amounts to a significant step backwards for the two countries.
Peter Roff is a senior fellow at Frontiers of Freedom, an organization that promotes consumer choice in the marketplace. A former senior political writer for United Press International he appears regularly as a commentator on the One America News Network.