Safety Falters As Chinese Quiet Those Who Cry Foul
By Ariana Eunjung Cha
Washington Post Foreign Service
Thursday, July 19, 2007; A01
HANGZHOU, China -- In spring 2006, an essay appeared on the Internet detailing collusion between the Chinese government's food and drug watchdog agency and a pharmaceutical venture. It accused the country's highest-ranking regulator of accepting a lakeside house and hundreds of thousands of dollars from the Kangliyuan Group in exchange for production licenses.
The problem is "darker and 100 times worse" than what was previously known, wrote the anonymous author. By that time, dozens had died from consuming fake infant formula, tainted antibiotics and other products.
Initially posted on only a handful of online industry discussion boards, the provocative e-mail was forwarded, copied and re-posted all over the Web until it got the attention of the Chinese government.
Law enforcement officials moved quickly to punish those responsible.
But instead of going after the corrupt government official or the company, they targeted Zhang Zhijian, who stumbled across the essay while reading news about the industry on one bulletin board and simply posted it to another.
Zhang, who worked in research and development for an unrelated pharmaceutical company, was jailed, accused of trying to sabotage Kangliyuan for his own commercial benefit. He was held for nine months, until February, when an investigation revealed that accusations of corruption at Kangliyuan were true. China announced on July 10 that Zheng Xiaoyu, head of the State Food and Drug Administration, had been executed for taking bribes from Kangliyuan and other drug companies, as the online essay had alleged.
"I didn't do anything wrong, but the local enterprises and the government attacked me because they were afraid of the truth getting out," said Zhang, 30, who lost his job and had difficulty finding another because of the arrest.
The case of Zhang and other would-be whistleblowers opens a window into the weaknesses of China's regulatory system, which in recent months has come under global criticism after a string of recalls of unsafe pet food, toothpaste, toys, tires and seafood.
It is a setup that suffers from infighting among the five main agencies charged with food and drug safety, a lack of enough personnel and a legal code that is still being written. But its most challenging problem may be that it allows officials to silence voices that are trying to expose trouble.
"The defect in the system is that it makes it difficult for democracy and public participation," said Zhao Kang, a professor of public policy at Suzhou University.
There have been other cases of whistleblowers being punished for going public.
In 2001, Zhou Huanxi, who worked on the factory floor of a company that makes drinks with vitamins and herbs for pregnant women, accused her company of using fake ingredients. The company was ordered to recall the products and was fined. Zhou was jailed on extortion charges.
In 2003, Gao Jingde, purchasing manager for Shanghai Litian Pharmaceutical, revealed the company was cheating consumers by repackaging another company's drug that was worth about $1.20 and selling it to consumers at nearly eight times that price. The company was ordered to lower the price of the drug. Gao lost his job.
In announcing an overhaul of its food and drug regulatory system in recent weeks, the Chinese leadership has repeatedly stressed the importance of what they term "public oversight" in ensuring the quality of its products. The government has set up Web hot lines for citizens to report suspected wrongdoing such as corruption, but legal experts say it will take more than that to convince people that they will not be punished for speaking out.
The difficulty whistleblowers face is compounded by what some academics have termed "local protectionism," the close relationship between government and business in many cities. Xue Lan, associate director of the School of Public Policy and Management at Tsinghua University, said local officials do not always think it is in their best interests to recognize corruption.
"Sometimes local regulatory agencies do not necessarily make the best effort to control issues because it may harm the local economy. So they let it go," Xue said.
For decades, the Communist Party has held primacy over the rule of law in China, making it almost impossible to bring legal action against party leaders and other high-ranking individuals. In addition, the country's legal system is based on socialist principles that value the needs of the society more than those of the individual, according to Chinese legal experts.
Chen Beiyuan, an attorney representing relatives of victims who died after taking a drug made by Qiqihar No. 2 Pharmaceutical with a poisonous ingredient, said the system allows people to sue a company for about 20 times the average yearly salary in the province if someone dies. Qiqihar has said it traced the tainted ingredient to a chemical supplier that tricked the company by substituting a less-expensive but dangerous industrial agent for an inactive ingredient in the medicine.
The Chinese legal system's socialist roots also explain why if someone reports a problem to the public and the state determines they are wrong, they could be put in jail for damaging the company. The reasoning, Chen said, is that "company enterprises are people's gatherings. You can't punish everyone in the company for problems caused by some individuals."
Advocate for Business
The story of how the Zheng, the food and drug safety official, was able to stay in power for so long despite continuing rumors, complaints and accusations of corruption -- like the one Zhang posted on the Internet -- begins in Zhejiang, the coastal province where Zheng built his commercial and political career.
Zheng served in the pharmaceutical industry in the provincial capital of Hangzhou for more than 23 years, working his way up to manager of one drug company before moving to Beijing in 1998 to work at what was then called the Drug Administration.
Zheng arrived as much of the Chinese government was being restructured so it could effectively regulate an increasingly prosperous capitalist economy.
In Beijing in 2002, Zheng made a show of his plans to consolidate the process for drug approvals by adopting a national standard for drugs and dissolving local ones.
"We must make government affairs open to the public, simplify the approval procedures, rectify our work style and work hard to create a favorable environment for those law-abiding companies to develop their business," Zheng told the state-run New China News Agency that year.
The new food and drug agency would come into existence the following year.
Among the central components of Zheng's reform plan was the awarding of Good Manufacturing Practice certificates to pharmaceutical manufacturers. They were awarded to entities that had supposedly passed rigorous inspections, and companies could no longer operate without them.
As Zheng continued to prosper, consolidating his power at the SFDA, so did companies based in his province. Kangliyuan was one such company. Zheng and Tang Xudong, Kangliyuan's chief executive, had what state media have described as a close relationship. The company received its good practice certificate early on, in 2002, according to announcements in the local state press.
Located in the country's domestic tourist center of Hangzhou, Kangliyuan at that time was just one of more than 6,700 up-and-coming drugmakers in China. That year, Kangliyuan reported about $26 million in sales, according to China Business News.
Just a few years later, however, thanks to the speedy drug agency approval of its requests for licenses, business was booming. Kangliyuan opened branches in Beijing, Shanghai and nearly 200 other cities in China. By 2006, it was producing 165 medicines with 286 specifications and was collaborating to develop 20 more. Most of the licenses were for antibiotics, which are highly profitable. Sales hit more than $210 million, making Kangliyuan one of China's largest pharmaceutical companies, according to the government Web site in Hainan province, where Kangliyuan's factories were located.
In all, about one-fifth of all drug production licenses during Zheng's tenure were issued to companies based in Zhejiang, according to state media.
Investigators later found that Kangliyuan was repackaging generic drugs and sometimes substituting neutral ingredients for real medicine. Drug agency investigators are still trying to determine the full impact of Zheng's and Kangliyuan's scheme.
"The corruption had a vile effect, as Zheng's offenses threatened public health and tarnished the image of the Party and the government," according to the report of his arrest.
Its offices here closed and its managers unreachable, Kangliyuan could not be contacted for this article.
As a result of the investigation into Zheng's dealings, a number of local government officials, including two former heads of the Hangzhou food and drug agency, have also been brought down. Zheng Shangjin is awaiting trial on charges of accepting bribes. And the former leader of Hangzhou's agency, Zhou Hang, was sentenced to death for taking bribes.
In addition, Kangliyuan's factories at a subsidiary on the southern island of Hainan were shut down in February.
170,000 Drugs to Review
Chinese officials have now begun the tedious process of reviewing nearly 170,000 drugs approved during Zheng's tenure.
Zhang, who posted the essay detailing Zheng's dealings with Kangliyuan, is employed by a pharmaceutical company based in Guangdong province. He has a girlfriend and owns an apartment close to his old company in Hainan but says he cannot go back and live there because he's been all but blacklisted by the drug industry there and cannot get a job. He's been compensated less than $150 (based on the average salary in the area where he used to work) for the more than $3,500 in pay he lost during the nine months he was incarcerated.
He said he has received no apology from the state or from the local government. The last communication he had with officials was the day Zheng was executed. He got a phone call from the prosecutors who helped convict Zheng, he said, and they told him not to talk about his case anymore, saying: "It's over. You understand? It's not certain people's fault."
"Their power is very great," said Zhang, referring to Kangliyuan and the government officials. Zhang says he worries that "once this wave of controversy is gone, they can start again."
Even though Zheng has been executed, cases related to him continue to crop up. Most recently, an employee of Hangzhou Aoyi Baoling Pharmaceutical posted a bulletin-board entry describing how her company made fake tonic for pregnant women that supposedly contained nutritional supplements.
"Hangzhou Aoyi Baoling, driven by a desire for profits, doesn't care about people's life and health," wrote Zhou Huanxi, 49, in an online essay.
In the report, Zhou said she worked in the factory's workshop and was told to mix sugar water instead of more expensive vitamins into the oral solution, which is still sold in stores across the country and costs about $2.50 for each box of 12 vials. She said she tried to report the scam to authorities in 2002 but that drug agency officials conspired with the company to mount a coverup.
Zhou was fired from her job and put in jail for three years and six months on extortion charges. She was released in November 2005 and posted her story online this March.
To make the information public was a "citizen's responsibility," she wrote. "The report was true. I should be given praises and rewards. It didn't occur to me that what I'd get is total destruction."
Reached at her home in Hangzhou, Zhou said she could not discuss the case because government authorities had told her they were continuing their investigation and expected to be able to announce something by the end of the month.
Hangzhou Aoyi Baoling general manager Zhong Hai Rong said the issue Zhou raised was a "technical one" in which the labeling didn't match the contents of the tonic. He said that the problem was fixed long ago and that there are no quality issues with the product.
Staff researcher Crissie Ding contributed to this report.
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