Something smells, you'll forgive the phrase, fishy. But the essence of the dispute crosses a number of Chinese fault lines and illustrates the sensitivities at play in this most different socio-political culture. Pork is one of the foods that has caused problems in China. It is cheap and plentiful, therefore popular. The illnesses and deaths caused by adulterated products was big news. To address the problem - both actual and perceived - new regulations were imposed. Walmart and others began to use the word 'organic' to convey quality and safety. So when the mislabeling was discovered, it touched a national nerve.
The implications may be even greater, however. As China's economy begins to feel the effects of the recession, competitive issues come into play. The US Congress is threatening to penalize China for currency manipulation. This legislation may never pass, may violate a raft of international statutes if it does (and may therefore be unenforceable)and is probably more for the benefit of US political posturing than any real intent. But for China, this is disrespectful - and it strikes at notions of national sovereignty as well as at the economic strategy which has brought the country such wealth and power. Walmart is the largest US employer. It also has $7.5 billion in sales, hundreds of stores and thousands of employees in China. With the Chinese economy in flux, the competitive advantages bestowed on this western company could become a source of discontent.
Walmart is also, in Chinese eyes, believed to possess great political influence in the US. So this may be a warning about more than just pork.
But then the combination of food, money and politics is a serious matter wherever you live. JL
Rahul Jacob reports in the Financial Times:
Public security authorities in China have detained a number of Walmart store managers because employees in their stores allegedly mislabelled ordinary pork as organic and the company has been told to temporarily close seven stores in the southwestern city of Chongqing.
Huang Bo, head of the industry and commerce bureau, said Walmart had been punished 21 times in Chongqing since 2006 for violations such as false advertising and mislabelling products.
In the latest episode, Walmart was fined Rmb2.69m ($423,548), according to Xinhua, the official Chinese news agency, but the US retailer declined to comment on the fine.
In a statement, Walmart said: “We believe the closure has come about as a result of the recent investigation in some of our stores in Chongqing” due to the issue of mislabelled pork. It said the closure of the stores for 14 days would allow it time “to focus on implementing corrective actions.”
The company said it sent a task force to the southwestern Chinese city several days ago to work with the authorities.
Paul French, an analyst at Access Asia, a marketing consultancy in Shanghai, said large retailers in China have been in trouble before for mislabelling food products, particularly for selling food after its sell-by date. But he said this was the first instance he knew of where a product was passed off as organic when it was not.
Mr French said that, following a scandal earlier this year involving a toxic additive fed to pigs in China, labelling a meat as organic would be a way of boosting sales.
“People see [organic] as a way of guaranteeing quality,“ Mr French said. “The problem in China is we have no central certification authorities. £1000 in an envelope will get you the certificate you need.”
Late last month, China’s Ministry of Agriculture said it had arrested nearly 1000 people involved in the manufacture and sale of the illegal additive. China’s largest meat processing company earlier this year was found to have sold pigs that had been fed the toxic additive clenbuterol hydrochloride.
In January, Walmart and Carrefour were fined for overcharging on promotional items. After Walmart was found to have misstated prices on promotional items at three stores, it pledged to refund consumers five times the difference between the price on the promotional label and the price at the cash register if the incident was repeated.
Walmart’s annual sales in China are just $7.5bn – a fraction of its global revenues of $420bn – but are growing at a double-digit pace. The company has encountered difficulty translating the potential of the market into financial reward, making its first profit in China in 2008, 12 years after entering the country.
The company has also had to deal with personnel changes. In May, Walmart’s chief financial officer and chief operating officer in China both resigned, citing personal reasons. The company declined to comment further on the abrupt resignations.
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