Poisoning the World

Inside Chinese food industry frauds and malpractices

Bloomberg News

A bowl of ice cream on a hot day in Shanghai gave American Mitchell Weinberg the worst bout of food poisoning he can recall. 

It also inspired the then-trade consultant to set up Inscatech — a global network of food spies.
In demand by multinational retailers and food producers, Inscatech and its agents scour supply chains around the world hunting for evidence of food industry fraud and malpractice. 

In the eight years since he founded the New York-based firm, Weinberg, 52, says China continues to be a key growth area for fraudsters as well as those developing technologies trying to counter them.
“Statistically we’re uncovering fraud about 70 percent of the time, but in China it’s very close to 100 percent,” he said. 

“It’s pervasive, it’s across food groups, and it’s anything you can possibly imagine.”

Police inspect illegal cooking oil, or "gutter oil," seized during a crackdown in Beijing in Aug. 2010.

While adulteration has been a bugbear of consumers since prehistoric wine was first diluted with saltwater, scandals in China over the past decade — from melamine-laced baby formula, to rat-meat dressed as lamb — have seen the planet’s largest food-producing and consuming nation become a hotbed of corrupted, counterfeit, and contaminated food.
Weinberg’s company is developing molecular markers and genetic fingerprints to help authenticate natural products and sort genuine foodstuffs from the fakes. 

Another approach companies are pursuing uses digital technology to track and record the provenance of food from farm to plate.
“Consumers want to know where products are from,” said Shaun Rein, managing director of China Market Research Group, citing surveys the Shanghai-based consultancy conducted with consumers and supermarket operators.

‘Business Opportunity’
Services that help companies mitigate the reputational risk that food-fraud poses is a “big growth area,” according to Rein. 

“It’s a great business opportunity,” he said. 

“It’s going to be important not just as a China play, but as a global play, because Chinese food companies are becoming part of the whole global supply chain.”
Some of the biggest food companies are backing technology that grew out of the anarchic world of crypto-currencies. 

It’s called blockchain, essentially a shared, cryptographically secure ledger of transactions.
Wal-Mart Stores Inc., the world’s largest retailer, was one of the first to get on board, just completing a trial using blockchain technology to track pork in China, where it has more than 400 stores. 

The time taken to track the meat’s supply chain was cut from 26 hours to just seconds using blockchain, and the scope of the project is being widened to other products, said Frank Yiannas, Wal-Mart’s vice president for food safety, in an interview Thursday.
Shanghai-based Zhong An Information and Technology Services Co. said in June it will use the technology to track chickens from the coop to the processing facility and on to the market or store.

Blockchain Pilot
Alibaba Group Holding Ltd., too, sees the potential for the eight-year-old technology to provide greater product integrity across its platforms, which accounted for more then 75 percent of China’s online retail sales in 2015. 

The planned blockchain project will involve the Chinese e-commerce behemoth working with food suppliers in Australia and New Zealand, as well as Australia Post and auditors PricewaterhouseCoopers LLP.
“Food fraud is a serious global issue,” said Maggie Zhou, managing director for Alibaba in Australia and New Zealand. 

“This project is the first step in creating a globally respected framework that protects the reputation of food merchants and gives consumers further confidence to purchase food online.”

Fraud costs the global food industry as much as $40 billion annually, according to John Spink, director of Michigan State University’s Food Fraud Initiative. 

In China, where the 2008 melamine milk crisis resulted in the death of at least six babies, it’s a hot-button issue compounded by the country’s growing appetite for higher quality food and swelling middle class. 

A Pew Research Center study last year found 40 percent of Chinese view food safety as a “very big problem,” up from 12 percent in 2008.

“What we have to do is reinforce our regulations to improve the transparency of the administration, for example information-sharing,” said Yongguan Zhu, director general of the Institute of Urban Environment, part of the state-funded Chinese Academy of Sciences.

Farmers pour away unsold milk in Hebei Province in Sept. 2008.
Zhu says blockchain could play an important role in improving traceability. 

Its database of records can be built like a chain and can’t be broken or re-ordered without disrupting the entire connection.

Last month, Beijing emphasized to authorities the need to be upfront in disclosing food safety issues.

“Food-fraud will always exist,” said Yongning Wu, chief scientist at the government-run China National Center For Food Safety Risk Assessment. 

Wu doesn’t see the problem disappearing.
“We can only develop technology to detect it,” he said. 

“However, fake-food producers will always update their technology to dodge inspections.” 

Wily Scammers
The wiliness of fraudsters is what makes Inscatech’s Weinberg less hopeful about blockchain. 

His firm mainly uses informants on the ground to sniff out where in the production process food-fraud is taking place, and most of his work in China is with western companies that manufacture or source product there.

Counterfeit liquor is tested at the Beijing administration for industry and commerce center in June 2007.

“The problem is the data is only as reliable as the person providing the data,” said Weinberg, who recalls seeing everything in China from synthetic eggs to fake shrimp that still sizzle in a wok. 

“In most supply chains there is one or more ‘unreliable’ data provider. This means blockchain is likely useless for protecting against food-fraud unless every piece of data is scrutinized to be accurate.”

A months-long Bloomberg investigation into the global shrimp trade last year showed how unreliable documentation had fanned an illegal transhipping scheme involving Chinese aquaculture exporters.
But blockchain is “light years” away from the system used by the global food industry today, which relies heavily on paper records, said Yiannas, Wal-Mart’s food safety chief. 

By recording the identity of those who input data into the chain, the technology removes the anonymity that has helped food-fraud to thrive, he said.
The role of humans in recording the supply chain will also diminish, said Yiannas. 

“More and more of these documents will eventually be captured in an automated way.”

China’s Food and Drug Administration didn’t immediately respond to an email requesting comment on the country’s food safety efforts.
Some companies are already bringing traceability to consumers. 

Fonterra Cooperative Group Ltd., the world’s biggest dairy exporter, started putting QR codes on cans of infant formula in April, enabling buyers to verify the product’s authenticity.

Criminal Factor
The challenges for China — “the factory of the world” — are especially vast because of its size, population, multilayered administrative divisions, and “the willingness of criminals to exploit every corner that they can in order to make money,” said Michael Ellis, who ran Interpol’s trafficking in illicit goods unit until October.
At Interpol, Ellis, a former detective with Scotland Yard in London, was involved in “Opson,” an operation that led to the seizure of more than 10,000 tons and 1 million liters (264,000 gallons) of hazardous fake-food and drinks across more than 50 countries.
Without a presence to fight it, food-fraud globally “will explode,” Ellis said. 

“It will just continue to grow, and who knows where it will lead.”

Poisoning the World

Contaminated food from China now entering the U.S. under the 'organic' label
By J. D. Heyes

The Chinese food production industry is the world's least-regulated and most corrupt, as has repeatedly been proven time and again. 

Now, it appears, there is no trusting anything that comes from China marked "organic."
Natural Health 365 reports that several foods within the country are so contaminated that Chinese citizens don't trust them. 

What's more, the countries that import these tainted foods are putting their citizens at risk.
U.S. Customs personnel often turn away food shipments from China because they contain unsavory additives and drug residues, are mislabeled, or are just generally filthy. 

Some Chinese food exporters have responded by labeling their products "organic," though they are far from it.
There are several factors at play which make Chinese claims of organic unreliable. 

First, environmental pollution from unrestrained and unregulated industrial growth has so polluted soil and waterways with toxic heavy metals that nothing grown in them is safe, much less organic. Also, there is so much fraudulent labeling and rampant corruption within the government and manufacturing sectors that it's not smart to trust what is put on packaging.
In fact, farmers in China use water that is replete with heavy metals, Natural Health 365 noted in a separate report. 

In addition, water used for irrigation also contains organic and inorganic substances and pollutants. Chinese "organic" food is so contaminated that a person could get ill just by handling some of it.
'Dirty water' is all there is
The report noted further: "This is reality – all of China's grains, vegetables and fruits are irrigated with untreated industrial wastewater. The Yellow River, which is considered unusable, supports major food producing areas in the northeast provinces."
Chinese farmers won't even eat the food they produce.

That's because it's clear that China's water pollution issues are so pronounced that it threatens the country's entire food supply.
Chinese farmers have said there is no available water for crops except "dirty water." 

As part of the country's industrial prowess, it is also one of the largest producers (and consumers) of fertilizers and pesticides, Water Politics reported.
The site noted further that as China's industrial might grows, so too does the level of contaminants in the country's water supply. 

Lakes, rivers, streams and falling water tables are becoming more polluted by the year.
In addition to man-made pollutants, animals produce about 90 percent of the organic pollutants and half of the nitrogen in China's water, say experts at the Chinese Academy for Environmental Planning. 

There are times when water is so polluted it turns black – yet it is still used to irrigate crops, and of course, that affects so-called organic farming operations as well.
These nine foods are particularly vulnerable to becoming tainted, Natural Health 365 noted:

1. Fish: Some 80 percent of the tilapia sold in the U.S. come from fish farms in China, as well as half the cod. Water pollution in China is a horrible problem, so any fish grown there are suspect.
2. Chicken: Poultry produced in China is very often plagued with illnesses like avian flu.
3. Apples and apple juice: Only recently has the U.S. moved to allow the importation of Chinese apples, though American producers grow plenty for the country and the world.
4. Rice: Though this is a staple in China and much of the rice in the U.S. comes from there, some of it has been found to be made of plastic, resin and potato.
5. Mushrooms: Some 34 percent of processed mushrooms come from China.
6. Salt: Some salt produced in China for industrial uses has made its way to American dinner tables.
7. Black pepper: One Chinese vendor was trying to pass off mud flakes as pepper.
8. Green peas: Phony peas have been found in China made of soy, green dye and other questionable substances.
9. Garlic: About one-third of all garlic in the U.S. comes from China.

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