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The Journal of the American Enterprise Institute

China’s Opportunity

Thursday, January 29, 2009

It is time for Chinese authorities to boost the independence and transparency of their legal system.

On January 22, cattle farmer Zhang Yujun and milk trader Geng Jinping were sentenced to death by the Intermediate People’s Court in Shijiazhuang for their involvement in the recent Chinese milk scandal. The same court later handed down a sentence of life imprisonment for Tian Wenhua, the former head of the dairy company at the center of the scandal, Shijiazhuang-based Sanlu Group (SSG). Wenhua pled guilty to charges of producing and selling fake or substandard produce in December. She was also ordered to pay a fine of 20 million yuan ($2.95 million). Eighteen other defendants have also been sentenced for their roles in producing melamine-laced “protein powder” to add to milk or selling the tainted milk to SSG or other dairies.

Soon after the milk scandal broke, it became obvious that adulteration of foodstuffs was commonplace in China, and was tolerated by Chinese companies and federal authorities. In September, six months after health problems were first reported to Chinese authorities, the scandal was exposed by a New Zealand shareholder of SSG. The delay in warning the public and withdrawing contaminated products meant that nearly 300,000 people—most of them children under the age of three—were affected. Six babies are known to have died. Parents were left without guidance on the safety of products and without assistance in the treatment of sick children. In late December, without consulting the affected families, Beijing brokered a compensation deal with the 22 companies implicated in the scandal.

The deal, totaling about $165 million, would give $29,500 to each of the six bereaved families and $4,400 to each of the several hundred families with a child seriously harmed by milk products. The families whose children were mildly affected by the contaminated products would get $290 each. Another $29.5 million would go to a fund to cover bills for lingering health problems.

The Chinese government should allow litigation that exposes corporate and government failures and permits victims to receive compensation for their injuries.

Some families have accepted the offer, under the condition that they pursue no further legal action. Yi Yongsheng and Jiao Hongfang of Gansu province lost their five-month-old son last May; the boy died from drinking melamine-contaminated milk, which led to kidney failure. By accepting the compensation from SSG, which has since filed for bankruptcy, Yi and Jiao have given up their right to sue the company. Shen Xianlei, one of their lawyers, said the couple was unlikely to get more than the settlement by taking their case to court in Gansu.

But families of sick children are concerned that little attention has been paid to long-term prognosis and that the deal offered to them bears little relation to the expected costs of care and treatment. More than 200 families of affected children have rejected the offer as insufficient and are bringing a class-action suit to have their cases considered individually. Class-action cases are extremely rare in China, and two previous attempts by smaller groups of affected parents, have failed. This latest appeal to the Chinese Supreme Court has so far been refused.

Others are in a worse position because their children are not even classified as victims, which means the parents are having to hire help or even quit their jobs to care for their sick kids. Most are not in a position to influence the authorities. One person who is in such a position, however, is Zhao Lianhai, a 36-year-old former employee of the Chinese Food Safety Board, whose son got sick from the bad milk. Zhao was arrested at the beginning of January after trying to hold a press conference to push for further compensation. He was told that negotiation was possible—but only if he stopped publicizing the scandal. It is because of people like Zhao that the Chinese authorities have not just brushed the whole tainted-milk affair under the carpet.

While this case is undoubtedly distressing, at least it has been made public. This is unique in recent Chinese history and definitely a positive sign. Beijing needs simply to let its courts to act properly without undue interference. The two executions may have been excessive punishment, but only two death sentences from among 21 defendants is relatively benign by Chinese standards.

Hopefully Beijing will learn a lesson from this sorry episode. Moving forward, the Chinese government should permit litigation that exposes corporate and government failures and permits victims to receive compensation for their injuries. If the courts are allowed to fairly weigh the loss of life and extract adequate damages for the victims, future contamination scandals are less likely to occur.

Roger Bate is a resident fellow at the American Enterprise Institute and author of Making a Killing: The Deadly Implications of the Counterfeit Drug Trade.

Photo Credit: Getty Images.

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