Industry gets creative to deal with China's supplement regulations

By RJ Whitehead

- Last updated on GMT

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Industry gets creative to deal with China's supplement regulations
To understand a developing industry, especially one that is moving as fast as the Asian food industry, it is important to look for trends.

One way to do this is to attend the same trade shows each year and compare the gist of conversations had with representatives of a selection of companies each time round. The results can be very illuminating.

Last year, for example, such briefings at Vitafoods Asia in Hong Kong threw up concerns over the feasibility of the Chinese nutraceutical framework: while nobody suggested that the market wasn’t filled with massive potential, there were worries that the regulatory system was hampering the efforts of international companies to make the most of it.

Based on conversations this year, one currently emerging trend is how companies are apparently becoming more comfortable to talk openly about measures they are taking to avoid gaining approvals and still move their products to market.

Indeed, four companies outlined to us the agreements they had made with Chinese distributors to deliver their products to locations near to China and then leave the local partners to navigate their movement into the People’s Republic.

Most likely, this would be done in cahoots with ministry officials in deals that would involve sweeteners and other transactions. “Once we’ve delivered the product, it isn’t our problem what our partner decides to do with it​,” an executive at a US-based multinational told us in Hong Kong.

It’s not the cost of approvals that concerns us, it’s the time​,” a mid-market manufacturer, also from the US, told us. “It is important for us that we hit China right now​.”

Not all the companies we talked to about this were from America, but the fact that two were was surprising. This is not least because business practices there are governed by the Foreign Corrupt Practices Act and the International Anti-bribery Act, as are any international companies with interests in the United States.

This became especially serious when in March this year, Japanese firm Marubeni Corporation agreed with the Department of Justice to pay a US$88m fine after pleading guilty to taking part in a scheme to pay bribes to high ranking Indonesian officials in order to secure a lucrative power project. Uncle Sam is definitely watching what is going on in business outside his borders.

Asked for his opinion, the US-China Health Products Association’s Jeff Crowther took a pragmatic view over the practice, although he stressed that his association would never advise its members to break the law.

When you do business in China, things aren’t just black and white, there is every shade of grey in between​,” he told us, adding that sometimes the needs of some corporations and the Chinese market demanded that creative methods be to work well within a complex system.

What is surprising to us is not the fact that these practices exist at all, it is how US businesses in particular have now become comfortable enough to openly brief the press about their part in this trend.

This is obviously an interesting matter and we will probe it as best we can. We will report back on occasion with our findings.

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