Posted: October 29th, 2011 - 3:15pm
Source: The Economist

Walmart, an American supermarket chain, has been having a tough time recently in China, one of its fastest growing markets. On October 25th it reopened 13 stores in the south-western region of Chongqing which were closed for two weeks as punishment for mislabelling a pork product. Chinese officials have recently had a pang of food-safety conscience, and a big foreign firm has offered an easy target.
Food-related scandals, often exacerbated by official negligence or corruption, can cause major political embarrassment in China. In the approach to the Olympic games in Beijing in August 2008, the leadership’s efforts to create an image of a safe and hygienic China led to the suppression of news about a widespread contamination of milk products with melamine, a chemical that can be toxic. By the time the central government admitted the problem in September that year, tens of thousands of babies had been affected and several had died.
Public anger over the incident hastened the passing of a food-safety law in 2009 which was intended to tighten standards, improve supervision and impose tougher penalties on violators. It appears to have done no more to alleviate public anxiety than did the execution in 2007 of a former head of the State Food and Drug Administration for taking bribes to certify products as safe. Toxic foodstuffs continue to be sold. This year the authorities announced a renewed campaign against the use of the steroid clenbuterol after it was discovered in pork products in March. The chemical can make meat leaner, but can also be the cause of heart palpitations, diarrhoea and muscle tremors.
By comparison, Walmart’s offence in Chongqing was minor. Officials said it had mislabelled ordinary pork and sold it as a pricier organic product. But in addition to closing its stores, the company was fined more than $575,000. Two Walmart employees were arrested and another 25 are being investigated. The company’s head in China and a senior vice-president resigned (though Walmart denies any link). A 60-member team was sent to Chongqing to investigate, and its Asia chief executive apologised to the mayor.
With more than 350 stores in the country and nearly 100,000 employees (as well as tough Chinese competitors), Walmart offers a tempting target to officials. It has been punished 21 times in Chongqing since 2006 for a variety of wrongdoings, ranging from false advertising to selling out-of-date food. But Caixin, a Chinese magazine, reported on its website that the latest sanctions against Walmart had been the toughest imposed by the Chongqing authorities on any retailer in recent years. It said aspects of the government’s treatment of Walmart were “worryingly” out of keeping with the spirit of the law, not least the principle that punishment should fit the crime.