China begins PR drive after spate of recalls

updated 2:37 p.m. ET July 13, 2007

BEIJING - 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.

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