chinesefood.jpgBe careful what you eat in China. No, this story is not about the weird food items on Chinese menus but instead about the more prosaic issue of food safety.

The topic is much in the news because of the scandal over adulterated ingredients and drugs exported from China. But it is China's own population that is most at risk from the poor food standards.

China's Health Ministry reported almost 34,000 food-related illnesses in 2005, with spoiled food accounting for the largest number, followed by poisonous plants or animals and use of agricultural chemicals.

According to new research from consultants AT Kearney, food safety concerns have increased significantly among Chinese consumers in the last two years and more than 80% are now willing to pay some sort of premium for food safety compared to just 57% in a similar 2005 survey.

Food fears are driving more shoppers away from the traditional wet markets to modern retail formats, which presumably is good news for western retailers.

But while western-style supermarkets may look cleaner and safer, consumers are oblivious as to what goes on behind the scenes.

China's fragmented and inadequate standards and supply chain make it difficult to get safe food to consumers. There are no consistent standards for food quality and safety, and there is inadequate inspection and ineffective enforcement. Produce and most meat are not required to go through a cold distribution chain, and according to the consultancy, 79% of retailers do not monitor temperature of products during shipping while two thirds do not check the temperature of the food they receive.

AT Kearney estimates that it will cost an amazing $100bn to create an effective food distribution network in China, but the benefits from reduced distribution costs, reduced waste and premium pricing for food safety should equal $160bn annually by 2017.

Chinese food products and ingredients are coming under increasing scrutiny both at home and around the world after a spate of scares involving toxins in products including pet food and toothpaste.

The government has been trying to tighten oversight of the country's rash of unregulated companies, many of whom operate on thin margins and cut corners using cheaper, and sometimes dangerous, additives. .

Of the 137 cases of sub-standard imported Chinese food found in April in the US, 77 had been illegally exported and so avoided China's export quality checks.

To counter growing concerns about food safety, the government recently announced it would create a recall system for unsafe or unapproved food products following a series of health scares that have led to illnesses and deaths.

China has also decided to fight back against the west, whose complaints about food safety are seen to be politically motivated. It has tightened controls on foods imported into China which led to 30 tons of frozen seafood from Australia being turned back because it was supposedly tainted with heavy metals, while five container loads of Evian mineral water were also rejected for having too many micro-organisms.

According to AT Kearney, China's growing middle class will spend more than $650bn on food by 2017, a combined annual growth rate of 17% from current spending of $150bn. More than 75% of this demand will come from second and third tier markets.


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