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10/17/2012 03:49 PM

'You Get What You Pay For'

The Hidden Price of Food from China

By SPIEGEL Staff

In recent years, China has become a major food supplier to Europe. But the low-cost goods are grown in an environment rife with pesticides and antibiotics, disproportionately cited for contamination and subject to an inspection regime full of holes. A recent norovirus outbreak in Germany has only heightened worries.

Qufu, the city in China's southwestern Shandong Province where Confucius was born, isn't exactly an attractive place. But its fields are as good as gold. A few weeks ago, a shipment of strawberries left those fields bound for Germany.

The air above the cities of the Chinese heartland is blackened with smog, as trucks barrel along freshly paved roads carrying loads of coal from the mines or iron girders from the region's smelters. Fields stretch to the horizon, producing food to feed the world's most populous country.

The chili pepper and cotton harvests have just ended, the rice harvest begins in two weeks, and garlic will be ready in April. Thousands of female farm workers are kneeling in the fields planting the next crop of a particularly profitable plant in the international food business.

"Garlic is eaten everywhere," says Wu Xiuqin, 30, the sales director at an agricultural business called "Success." "We sell garlic all over the world, and increasingly to Germany." The going price of a ton of white garlic is currently $1,200 (€920). The Germans, says Wu, insist on "pure white" product, and they want the garlic individually packaged.

Well over 80 percent of the garlic sold worldwide comes from China. The "Success" farm produces 10,000 metric tons a year. Based on what she's seen at food conventions in Berlin and elsewhere, no country on Earth can compete with China. Her company supplies peeled, flaked, granulated and pulverized garlic, says Wu, and it has now added ginger, chili peppers, carrots, pears, apples, sweet potatoes and peanuts to its product line.

China, which already sews together our clothes, assembles our smartphones and makes our children's toys, is now becoming an important food supplier for Germany. Since China, as a low-wage country, doesn't exactly have a good reputation among consumers, the food industry usually doesn't mention the origin of the products it sells. Many Germans only realized how much of the food on their plates is harvested and produced in China when thousands of schoolchildren in eastern Germany were afflicted with diarrhea and vomiting two weeks ago in an epidemic thought to have been triggered by Chinese strawberries contaminated with norovirus.

A Growing Global Supplier of Food

There are some bizarre aspects to the global flow of food products. In some parts of China, the population still doesn't have enough to eat. To address the problem, the country is buying up farmland in Africa and importing massive quantities of powdered milk, chicken and pork. EU-based companies sold 393,000 metric tons of pork to China last year, an increase of 85 percent over the previous year. Food companies see China as an attractive growth market.

Conversely, China is also selling far more food products to Europe than it used to, as the world's top exporter recognizes a profitable growth market in Europe. From 2005 to 2010, the value of Chinese food exports worldwide almost doubled, increasing to $41 billion. And Germany, which imported €1.4 billion worth of food from China last year, is becoming an increasingly important customer. Although the country only accounts for about 2 percent of all German food imports, "China has moved into this market with surprising speed and momentum," says a food industry expert.

As always, the country has quickly adapted to the market's needs. While it was mostly Chinese specialties that were sold in German grocery stores in the past, there is now a growing market for cheap staple goods and prepared ingredients, such as the sliced strawberries in 10-kilo (22-pound) buckets that ended up in German school cafeterias.

Two things make China appealing for large companies such as Nestlé, Unilever or Metro: price and volume. "Of course we could buy our onions or mushrooms from 10 different suppliers, but that would entail a huge effort," says a food industry executive. Food companies have to familiarize each supplier with the market and then manage and monitor them.

China's farmland is as vast as its supply of cheap labor. "Picking, washing and cutting up strawberries is labor-intensive because using machines is almost impossible," says Felix Ahlers, the head of Frosta AG, a German frozen food company. This makes it more expensive to buy fruit from Europe, as his company does. But, as Ahlers points out, there are producers that only pay attention to price.

The diversity of products China has to offer also seems to be unlimited. For example, the country has become the world's largest exporter of honey. It is also starting to produce more and more finished products, a market with even bigger profit margins than food commodities. A significant portion of the world's salmon haul is processed in China, into smoked salmon, for example. The country famous for Peking Duck is now making frozen pizzas for the global market -- at a fifth of German prices.

Farmers Who Don't Eat Their Own Food

From an environmental standpoint, the production of pizzas on a global scale isn't all that worrisome. According to calculations by the Institute for Applied Ecology in the southwestern German city of Freiburg, shipping frozen products has only a minor adverse effect on our environmental footprint. Of course, it's "always best to eat regional and seasonal food," says Moritz Mottschall, a researcher at the institute. But if someone has a taste for strawberries in the fall, he adds, transporting 10 tons of product by ship from China generates only 1.3 tons of CO2 emissions. When trucks carry the same amount of product from the Spanish city of Alicante to the northern German city of Hamburg, they emit 1.56 tons of CO2 into the atmosphere.

The biggest problem with Chinese food products is the local production environment, which includes the excessive use of toxic pesticides for crops and of antibiotics for animals, sometimes coupled with a complete lack of scruples. In 2008, some 300,000 infants in China were harmed by milk and baby formula products adulterated with the chemical melamine. Chinese producers had added the substance, which is especially harmful to the kidneys, to powdered milk.

Chinese producers have also sold peas dyed green, which lost their color when cooked, fake pigs' ears and cabbage containing carcinogenic formaldehyde. Then there was the cooking oil that was captured in restaurant drains, reprocessed, rebottled and resold. The government newspaper China Daily has even reported on fake eggs.

Wu Heng has risen to become a prominent food-safety advocate in China. Last spring, Wu read about a strange powder that dealers were adding to pork so that they could sell it as beef, which is more expensive. Wu quickly developed an aversion to noodle dishes listed as containing beef.

He put together a website that includes a map pinpointing Chinese food scandals reported in the media. Wu called his website "Throw it Out the Window," an allusion to former US President Theodore Roosevelt, who is said to have thrown his breakfast sausage out the window in disgust after hearing about the appalling conditions in Chicago's slaughterhouses.

Animal products are the most questionable, says Zhou Li, a lecturer at Beijing's Renmin University who studies food safety. Meat is more profitable than vegetables, which only increases the incentive to maximize profits.

Zhou notes that farmers used to eat the same foods they sold. But now that they are aware of the harmful effects of pesticides, fertilizers, hormones and antibiotics, they still produce a portion of their farm products for the market and a portion for their own families. The only difference is that the food for their families is produced using traditional methods. In fact, many wealthy Chinese have bought their own farms so as not to be dependent on what's available in supermarkets. There are also reports of special plots of land used to produce food exclusively for senior government officials.

A Porous Inspection Regime

The Chinese government introduced a new food safety law in 2009 and established a food safety commission in 2010. In addition, consumers who report illegal activities will reportedly receive monetary rewards.

But there are still many problems, as evidenced by an early warning system in Brussels designed to detect contaminated food and animal feed products for all EU countries, which disproportionately flags products originating in China. By last Friday, 262 reports on Chinese products had been received in Brussels for 2012 alone. They included noodles infested with maggots, shrimp contaminated with antibiotics, foul-smelling peanuts and candied fruit with an excessively high sulfur content (see graphic).

Ulrich Nöhle is very familiar with food production in China. A professor of food chemistry, Nöhle has worked for many years as an independent auditor in China, where he inspects products for quality on behalf of German retailers. He says that "you get what you order" from China, explaining that German retailers have to "specify how the product is to be grown or what standards are required to label a product as organic, for example." But, he adds, those who order products from China that are the cheapest possible and have not been inspected have only themselves to blame when they don't receive the goods they expected.

In one case, Nöhle discovered that sweeteners ordered in China by German customers had a strong odor of solvents. But when he spoke to the Chinese producers about it, they said: "It always smells like that." Nöhle had to have the production facilities reorganized until the product was up to German standards.

Once products are on their way to other countries, they are subject to very little inspection. At the port of Hamburg, which handles a large share of overseas food products destined for the European market, more than 15 percent of shipments containing animal products and 20 percent of those containing plant products are now from China.

In the case of fish, meat, honey and dairy products, an importer is required to report the products to the veterinary and importation office at the Hamburg port prior to arrival as well as to submit import manifests. The office then decides whether the products can be imported without being inspected. Sealed containers are only opened when there are doubts about their contents. When they are opened, veterinarians examine the containers to make sure that the refrigeration is working and that the contents were shipped at the correct temperature. Subsequent inspections are the responsibility of local food-inspection agencies, which are more knowledgeable about fast-food restaurants and farms than about global flows of commodities.

Plant-based food products are subject to even more lax monitoring, and they usually enter the EU without any inspection, whether fresh, frozen or preserved. The exceptions are only a small number of special food products that have attracted negative attention in the past or are currently under suspicion, and many of these products are now from China: peanuts, soybeans, rice, noodles, grapefruit and tea. These products are frequently inspected and, on rare occasions, individual countries even impose import bans.

Losing Faith in Inspectors

The inconsistent inspection regimen also complicates the search for the causes of problems. In about half of the 3,697 cases in which the EU issued warnings last year, consumer advocates "could no longer trace the products to the original producers," says Höhle, the food inspector. At least the supplier of the strawberries behind the recent norovirus outbreak in eastern Germany is now known. The fruit was grown, harvested and frozen in Shandong Province. And a Chinese company shipped it from the port in Qingdao to Hamburg.

In Hamburg, a German distributor, Elbfrost Tiefkühlkost, took delivery of and paid duties on the 44 tons. The next day, the company trucked the strawberries to Mehltheuer, a town in the eastern state of Saxony. Elbfrost's main buyer was Sodexo, an international catering company headquartered in France, which operates 65 regional kitchens in Germany. Officials with the Federal Institute for Risk Assessment, together with prosecutors in Darmstadt, near Frankfurt, are now conducting a painstaking investigation to find out where the strawberries were contaminated.

Elbfrost management says that it will no longer buy products from China because it cannot guarantee that Chinese suppliers are shipping "product of flawless quality." But if quality is so uncertain, why did Elbfrost order products from China in the first place? The company, which is based in Saxony, has sourced strawberries, mushrooms and asparagus from China. Elbfrost claims that it is dependent on imports, and its management emphasizes the "attractive pricing" of Chinese products. Last year, Germany imported more than 31,000 tons of processed strawberries from China, at an average price of €1.10 per kilogram.

The world's largest retail chains, Walmart, Carrefour, Tesco and Metro, as well as producers like Coca-Cola, Unilever, Barilla, Campbell's and Nestlé, have recognized that they cannot rely on inspections from suppliers or governments. But they also can't afford to sell contaminated food products, given the potentially immense harm to their image. This is why the biggest companies in the industry have joined forces to form the Global Food Safety Initiative, with the aim of developing their own quality controls. "Together with our suppliers, we set certain standards that we believe to be correct," says Peter Overbosch, deputy head of global quality management at Metro AG.

The initiative doesn't include smaller companies, such as those that supply caterers and restaurants. In the end, however, the consumer also bears some of the responsibility. In general, China is certainly capable of producing high-quality products, says a food inspector from Hamburg, "but you get what you pay for."

BY SUSANNE AMANN, CHARLOTTE HAUNHORST, UDO LUDWIG, MAXIMILIAN POPP, SANDRA SCHULZ, ANDREAS ULRICH AND BERNHARD ZAND

Translated from the German by Christopher Sultan

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