PANIC IN CHINA DISTORTS WORLD FOOD SUPPLIES

HONG KONG — Travellers flying out of Hong Kong International Airport are still being constantly reminded through the public announcement system that it is an offence to leave with more than two tins of milk powder.
The Hong Kong Government in March slapped a restriction on the amount of infant milk formula that could be taken out of Hong Kong, following widespread reports that it had run out of the product.
In fact, people have been arrested for violating the ban, and they face penalties of up to HK$500,000 and two years in prison.
Mainland Chinese have rushed to buy foreign-made milk powder, since 2008 shunning locally-made products for fear of contamination, when milk powder in China was found to be laced with the industrial chemical, melamine. Some 50,000 babies were hospitalised, 300,000 fell ill and six died.
In China the scandal was seen as an indictment on a society so bent on getting rich that it would tamper with food for babies to boost profit.
Almost a year ago, Yi Li a leading Chinese food manufacturer recalled products tainted with mercury, six months after another company, Mengniu, had to destroy products found to contain aflatoxin, which can cause serious liver damage.
No wonder parents are scared. With some 16-17 million babies born in China each year, milk powder consumption in China reached 37.8 million tonnes last year.
With their rising purchasing power, many Chinese now have the option to look outside the country for safer food. And when the Chinese decide to act, they can quickly distort the global market, causing — most recently — milk formula shortages in countries as far south as Australia, and north to Britain.
At the height of the buying panic, shops in Australia were forced to restrict sales of infant formula as supplies ran short. Similar restrictions are in place in the UK.
Chinese customers and tourists buy the milk in bulk to send home or sell online. Singapore newspapers report that Singaporeans are being paid between S$8 and S$12 for each tin of milk powder they bring into China. Smuggling is happening.
Despite the best efforts of Chinese manufacturers trying hard to win back market share, they are battling. One leading manufacturer, Yashili International Holdings, has resorted to using blonde toddlers in advertisements to whitewash its Chinese origin. But will it work?
There have been a litany of incidents involving food safety.
In recent weeks, rice from Hunan province, which produces 15 per cent of China's rice crop, was found to be contaminated with cadmium.
This coincided with discovery at Chinese markets that fox, rat and mink meat was being doctored with gelatine, food colouring and nitrate, then sold as mutton in Chinese markets.
When consumers can no longer trust their home-grown food, it is a serious issue for a country which aims to become 95 per cent self-sufficient, primarily in rice, still a staple in Chinese diet.
A cornerstone of Chinese Communist Party policy under Mao Zedong was — and still is — food self-sufficiency, following the so-called Great Chinese Famine between 1958 and 1961.
Professor Yuan Longping, whose work in the 1970s made him China's "father of hybrid rice", told a seminar in Jiangsu in February that a hectare of rice which can feed 27 people today must be able to feed 43 people by 2050.
The professor said he would attempt to push the yield of one hectare of his super hybrid rice to 15 tonnes by 2015, up from his current record of 13.5 tonnes. Xinhua reports that Yuan hopes to have a mass plantation of such rice operational by 2020, in an effort to meet China's soaring food demand.
But even if China can meet its own food needs, its increasingly educated and sophisticated consumers will demand imported food, free from the tampering hands of greedy manufacturers.
China is increasing imports of Thai rice, said to cost nine times more than local produce. This is good news for Thailand, struggling to deal with its rice mountain (the result of its expensive rice subsidy programme).
The International Grains Council has increased its forecast for Chinas rice imports in 2013 by 16 per cent to 2.2 million tonnes, especially from Vietnam and Pakistan. If the trend continues, China is likely to overtake Nigeria as the world's largest rice importing country.
Leaving aside today's food safety problems, China's growing purchasing power will have ramifications for the rest of the world, whether it is milk powder today or some other products tomorrow.