When pork prices hit an all-time high in June, premier Wen Jiabao reverted to familiar reassuring mode, promising shoppers that prices would come under control in three separate speeches.
It may strike a few non-Chinese as a little odd that one of the most senior political figures should bother himself with such matters. But as we’ve mentioned before, the price of pork is a big deal in China (see WiC116). So imagine the vitriol after a retailer (and helpfully enough, a foreign one too) was exposed for subterfuge at the meat counter.
The supermarket villain was Walmart, which has been discovered to be selling ordinary pork as a more expensive organic variety. Last week the local government in Chongqing detained 37 employees and ordered the temporary closure of all 13 Walmart stores in China’s most populous municipality. Walmart was also fined $420,000.
The world’s largest retailer by sales had little choice but to eat humble pie, also issuing an apology to customers for the closing of stores. It said it was working with local officials to improve its operations in Chongqing, which employ 3,000 of the company’s almost 100,000-strong China workforce. Then this Monday it was announced that Ed Chen, president and chief executive of Walmart China, had resigned.
Walmart has problems with the regulators in Chongqing before, and has been punished 21 times for misleading advertising or for selling substandard or expired food, says Xinhua. Most recently in March, it was fined for selling out-of-date duck meat. Bloomberg reports that Chongqing’s director of law enforcement is far from pleased. “Walmart has been quick in admitting their wrongdoings, but slow in correcting them,” chided Tang Chuan. “Every time, it feels like we are punching our fists into cotton.”
Foreign food retailers do try to police their supply chains but not always successfully. One problem is that their buying staff are routinely bribed by suppliers to stock their products. In 2008, eight Carrefour employees were prosecuted for awarding contracts to fresh food suppliers in exchange for cash incentives.
Still, mislabelling ordinary pork as organic might seem like a relatively minor offence in a country prone to much more serious food scandals. Regulators continue to battle against poisonous baby milk, for instance. More specifically for pork, it has been a struggle to keep the additive clenbuterol (see WiC66) out of the country’s hoggeries.
But analysts also say Walmart’s latest mishap again highlights that multinationals get a much rougher ride from officialdom than their Chinese competitors. That can mean being judged more stringently in terms of quality control and labour rights. And it might result in swifter punishment for practices that seem much more widespread.
It’s not just retailers in the firing line – foreign firms also seemed to be prominent when authorities began fining consumer goods makers for price hikes earlier this year (see WiC106).
“What becomes obvious in this Walmart situation is that foreign companies operating in China have no effective remedies—judicial, administrative, or political—to counter what might be capricious governmental activities,” James Zimmerman, a Beijing-based lawyer for Sheppard Mullin Richter & Hampton, warned the Wall Street Journal.
Chongqing has also undergone a patriotic makeover recently, under its Communist Party secretary Bo Xilai. The claim is that Bo has been using a ‘red culture’ campaign to bolster his chances of joining the nine-person Standing Committee of the Politburo – China’s highest decisionmaking body (see WiC101). Commentators say the crackdown on Walmart could be another move to whip up popular support, says Hong Kong’s Sing Tao Daily.
The scandal comes at a difficult time for
Walmart. The retailer recently reported a quarterly loss from its Chinese operations and said the number of visitors to its stores was dropping. Last year Walmart sales in China reached $7.5 billion, accounting for just 2% of its global revenue.
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