China Has Cornered The Global Market In Vitamins...

It might not be the best idea on Earth for Americans to be depending on other nations for our food and drug safety when the Bushites have been busy building anti-American sentiment around the world.

By Tim Johnson
McClatchy Newspapers

SHIJIAZHUANG, China - If you pop a vitamin C tablet in your mouth, it's a good bet it came from China. Indeed, many of the world's vitamins are now made in China.

In less than a decade, China has captured 90 percent of the U.S. market for vitamin C, driving almost everyone else out of business.

Chinese pharmaceutical companies also have taken over much of the world market in the production of antibiotics, analgesics, enzymes and primary amino acids. According to an industry group, China makes 70 percent of the world's penicillin, 50 percent of its aspirin and 35 percent of its acetaminophen (often sold under the brand name Tylenol), as well as the bulk of vitamins A, B12, C and E.

In the wake of a pet food scandal, in which adulterated wheat gluten from China led to the deaths of thousands of pets in North America, and other instances of food and toothpaste tampering, China's vitamin producers are reaching out to reassure U.S. consumers that their vitamins are safe.

Whether that's true isn't clear, however. Foreign food-safety experts say China's larger companies have reputations to protect. The question is how they maintain quality control.

In this pharmaceutical hub, a two-hour train ride south of Beijing, managers at what may be the world's largest vitamin C factory said they're constantly improving quality control to keep pace with the tenfold increase in production this decade.

"We used to only comply with domestic standards. Now we must comply with international standards," said Liu Lifeng, an aide to the general manager at the Weisheng Pharmaceutical Co. Ltd.

Food and drug safety inspectors drop in at the plant from time to time.

"The authorities come unexpectedly without telling us," added Tian Yumiao, the senior director of the quality control department of Weisheng.

But the inspectors aren't exactly neutral guardians of public health. They work for the city government, which is a part owner of the parent company of Weisheng Pharmaceutical. That kind of relationship between food and drug inspectors and China's booming agricultural and pharmaceutical industries is coming to the fore as an issue in the food safety debate. The local government in this thriving city of 2 million people would suffer if it did anything to hurt the growth of local vitamin and drug producers, and local officials might be reluctant to admit that a public safety issue had arisen.

"That's a conflict of interest right there," said Kathryn Boor, a food safety expert at Cornell University. "You really need a disinterested party involved in inspections."

Issues of food and drug safety ripple across China today. The former chief of the state Food and Drug Administration, Zheng Xiaoyu, was given the death sentence Tuesday for taking $832,000 in bribes to let unsafe drugs on the market. One Zheng aide was sentenced to a 15-year jail term last autumn, and a second was accused in May in the bribery scandal.

A survey earlier this year said more than three-fifths of Chinese worry about whether the food they eat is contaminated or adulterated.

Observers of China's food and dietary supplements industry say many larger companies, such as Weisheng, are well-managed and obtain key global certifications.

At the sprawling Weisheng plant, uniformed employees bustle about on neatly swept walkways, entering production areas where assembly lines purr. Machinery seemed clean, although managers barred a visitor from taking photographs in factory areas. Only minor odors emanated from a water recycling area.

"The industry in China is bifurcated between top-notch companies that are highly skilled and do all the right things, and the second- and third-tier producers, some of which are just sloppy bucket shops," said Peter Kovacs, a food industry consultant based in Incline Village, Nev.
Foreign brokers concur that the low end of China's market has severe problems.

"Sometimes you enter a factory, and you say, `I can't believe they produce food here.' It's dirty and the machines are old," said Jan Willem Roben of Vision Ingredients in Shanghai, a broker of food additives for export.

Since U.S. laws don't require food and drug sellers to label products with the country of origin of ingredients, it's impossible for consumers to know where food or supplements are coming from, not to mention what factory produced them.

Vitamins fall into an area in China that straddles the food industry, comprising some 2 million businesses that exported $2.5 billion worth of goods last year, and the drug industry, which has 5,000 companies. Cases of adulterated or mislabeled products have hit both food and drug companies.

Fake drugs to treat impotency and help with weight loss are legion in China. Some African nations complain of fake Chinese medicines hitting their pharmacy shelves. Shady small pharmaceutical firms have exported bogus anti-malaria medication to Southeast Asia, where the illness is prevalent, allowing sick people to grow sicker.

"We really believe they are criminals," said Dr. Henk Bekedam, chief of the World Health Organization office in China, referring to producers of fake medicines.

Cheap labor has given China Inc. its edge in manufacturing. But pharmaceutical laboratories, which aren't labor intensive, benefit from subsidized rates on water and energy consumption, and often-lax oversight of environmental rules.

China's entry into vitamin C involved ingenuity - and an unwitting assist from the U.S. Department of Justice. In the late 1970s and early 1980s, several big Chinese drug companies, working with the government-backed Chinese Academy of Sciences, devised a method to cut the normal five-step process for making vitamin C to a two-step fermentation process, leaving European, U.S. and Japanese firms a step behind.

The new method cut costs and gave China a manufacturing edge. It wasn't until 1997, when U.S. attorneys broke up what they said was a price-fixing cartel of European and Japanese producers, that the door swung wide open for the Chinese producers.

Firms such as Weisheng, which had planned to produce 3,000 tons of vitamin C a year, stepped up its capacity to 30,000 tons a year by mid-2004, which it claims is the largest in the world. Another company across the city, Hebei Welcome Pharmaceutical Co. Ltd., has a capacity of 20,000 tons a year. Together, the two companies make nearly half of the annual world production.

"The Chinese did a good job in this. They used their existing know-how and leveraged it in a clever way," said Alexander Filz, a spokesman for DSM, a Dutch chemical, nutritional and pharmaceutical company, which is the sole competition in Europe for vitamin C production.

But then Weisheng and three other big vitamin C producers appeared to take cues from their shattered competitors. Critics say the Chinese companies practiced predatory pricing, undercutting the remaining producers, with an eye to cornering the world market and making an eventual killing.

"They formed the cartel in December 2001 when the prices were under $3 a kilogram," said William Isaacson, a Washington, D.C., attorney. Isaacson represents clients who are suing the Chinese companies in federal court in Brooklyn, N.Y., for damages from current high prices.
Today, only one Western company still makes vitamin C - Dutch-based DSM - and as China monopolizes vitamin C production, prices have hit $6 a kilogram (2.2 pounds).

Managers at Weisheng brush off the price-fixing charges, which may come to a head at a June 5 court hearing in Brooklyn, and say potential contamination of vitamin C couldn't occur under their strict quality control system.

"It's impossible," said Zhang Heming, vice director of the umbrella Shijiazhuang Pharmaceutical Co. Ltd. "I've done research on this pet food case."

"Our procedures, our facilities, even our air conditioners and water supply all comply with international standards," said Tian, the quality control department director.
An assistant brought in a pile of certificates showing the company had met stringent European and British quality standards, and said U.S. standards are similar.

Chinese food safety experts bristle at what they say is the West's exaggerated response to the pet food scare, in which melamine, a toxic chemical used in plastics, was added to wheat gluten, and the general "food fright" swirling around Chinese exports.

He Jiguo, a food safety expert at China Agriculture University, said it's difficult to deter companies with criminal or fraudulent intent before a mishap is reported.

"There are thousands of illegal things you can add to a product. The supervisory authorities can't literally test for each one of them," He said. "It is only after an accident happens that one finds out, just as a police officer can't arrest a thief before he commits a crime."

One Dutch expert said European and U.S. companies are reaping the benefits as Chinese companies reel from the fallout from food safety worries.

"There is an interest in the farm lobby in Europe and the United States to exaggerate. Everybody is always very happy when there's poor quality coming from the competition," said M.A. Keyzer, the director at the Centre for World Food Studies in Amsterdam.

Early reports indicate that Chinese food exporters already are experiencing a drop in sales.
Boor, the Cornell expert, said concerns about the safety of the global food trade are a useful wake-up call to U.S. consumers.

"I think we take an awful lot for granted here in the U.S. that people are doing their jobs all along the food chain," Boor said.

McClatchy special correspondent Fan Linjun contributed to this report.


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