25 September 2008 08:37 [Source: ICIS news]
By Leon Toh
SINGAPORE (ICIS news)--As South Korea and France join the growing list of countries banning products made in China in the wake of the melamine-in-milk case, exports could weaken further, analysts said on Thursday.
South Korea has banned Chinese food products after melamine was found in a snack imported from China and a biscuit brand from Hong Kong, the Korea Food and Drug Administration said on its website.
As France too stipulated the immediate removal of any food containing Chinese milk products from stores, the number of countries across Asia, Africa and Europe that have recalled or restricted Chinese dairy sales has risen to 20, according to media reports.
While the ratio of dairy products to overall exports maybe small, the effect of the contamination could take on a disproportionately huge impact and has revived concerns about Chinese food-safety controls after previous scares over seafood, dumplings and pet food, sources said.
"This is a kind of setback for China in terms of sustaining quality control and this is one after another," said United Overseas Bank economist Suan Teck Kin, who covers the Greater China region.
Suan cited the contamination of pet food last year by the same chemical and the massive recall of Mattel toys that were manufactured in China due to fears of lead poisoning.
"All these damages to China’s reputation unfortunately came at a very bad time," Suan added.
A slowdown of the global economy has seen a major drop in Chinese exports, as the US, its major market, grappled with a severe financial downturn and the latest controversy has dented China’s reputation further.
"The milk scandal may affect other product exports, and foreigners will lose confidence in Chinese products," said Yan Yalei, a food and drink analyst from Bohai Securities in Tianjin.
In a bid to salvage its reputation, China announced a number of measures to improve its food safety and officials said around 80 new product testing centres would be set up in the next two years and outdated equipment would be replaced, the official Xinhua News Agency said.
Around 29 provincial areas had set up special working groups to regulate the dairy product market and local governments would provide subsidies to dairy farmers, in a bid to reduce the cost of feeding cows, Xinhua added.
However, analysts believed that the latest scandal had caused considerable damage and Asia's main exporting country would have to do more than firefighting exercises to restore global confidence.Judith Wang, Dolly Wu and Pearl Bantillo contributed to this article
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