http://www.financialpost.com/story.html?id=857927

Financial Post (Canada) October 3, 2008

China faces tough road from scandal

Tainted Milk; Premier aims to promote trade despite woes

"In the midst of what threatens to become the worst product safety debacle in China's recent history, Premier Wen Jiabao this week called for the country's domestic producers to do more to sell their brands abroad.

"It may prove a tough target given the twin blights confronting the nation's producers -- the tainted milk scandal that has claimed the lives of four babies and put tens of thousands more in hospital, and the widely forecast SLOWING global demand for Chinese exports.

"When the milk scandal first became public three weeks ago with the revelation melamine was found in baby formula from a Chinese factory, it seemed confined to mainland China. Since then several well-known Western brands, including Cadburys, Unilever and Kraft, have pulled their products from store shelves in more than a dozen countries.

"But the scandal could not have come at a worse time for China, which is also facing the prospect of slowing demand for its cheap exports as economies in Europe and the United States weaken. Chinese officials already forecast growth will slow from 11.9% last year to perhaps 9% in 2008 -- other observers say it could be down to 8%. The "downshift" is largely because of "MARKED DECELERATION in the growth of Chinese exports to the U. S. -- up only 8% year-over-year in June 2008 following average annual gains in excess of 25% over the 2003-07 period," Stephen Roach, Morgan Stanley's Asia chief, said in a report this week.

"Meanwhile, there could be further problems for Beijing to deal with as more details emerged about a possible cover-up that prevented news getting out until after the Olympics. Communist Party mouthpiece The People's Daily says city authorities in Shijiazhuang, where the company at the centre of the scandal is based, covered up the problem for more than a month from Aug. 2."

http://www.timesonline.co.uk/tol/news/world/asia/article4858528.ece

Times Online UK October 1, 2008

China sorry for sitting on powdered milk report during Olympics

"A Chinese official has issued an unusual apology for sitting on a report of tainted milk during the Olympics, as China’s president said lessons must be learnt after 12 per cent of milk powder was found to be contaminated.

"China’s worst-ever food scandal has already claimed the lives of four babies and sickened some 53,000 after they were fed the powder, made by the once-prestigious Sanlu Group. It had been laced with the industrial chemical melamine, used in plastics and glue.

"The government has already said that the city authorities in Shijiazhuang, where Sanlu is based, had covered up the extent of the problem for more than a month while China was under the international spotlight during the Beijing Olympic Games.

"Wang Jianguo, a city government spokesman, revealed that Sanlu had approached them for help in managing the media response on August 2 – just six days before the games opened. Mr Wang did not say whether the municipality complied with the media control request, but he did say that the problem was not reported to the Hebei provincial government until September 9.

"Officials had not thought through the consequences of their actions, he admitted. “The bungling of the best opportunity to report the handling of the issue caused much harm to people’s safety, and seriously affected the image of the party and the government,” he said. Mr Wang also voiced “deep guilt and pain” at the scandal.

"In fact, local media had known that problems were being reported by parents of babies across China who had been fed Sanlu formula. Many had kidney stones. However, the reporters were unable to publish their findings because of strict media controls imposed by Communist Party censors – especially during the August games.

"The scandal has shone a spotlight, once again, on deficiencies of industry oversight and the weakness of regulatory bodies, some of whose officials have in the past been jailed for corruption.

The statement by President Hu, who was visiting dairy companies in central Anhui province, underscores how seriously the government is taking the public outrage. “Food safety is directly linked to the well-being of the broad masses and the competence of a company. Chinese companies should learn the lessons,” he said.

"However, he did not say whether the party would try to tackle the collusion of local governments in hiding similar scandals or the media controls that kept the news out of the public eye for so many months."

weren't several of their largest dairy and dairy ingredient producers involved? Does the 12% sound low to anyone else? Think of the unreported cases/cases not initially related to the tainted milk, products made, ingredients and product exported. 12%?