This piece was written for inclusion in the book China in 2008: A Year of Great Significance, forthcoming from Rowman & Littlefield.

Shanghai

A few years ago a televised singing competition sponsored by Mengniu, the country’s largest dairy producer, became one of the most popular events in China, setting off an intense cultural craze. The American Idol-like Mengniu Yoghurt Supergirl Contest drew, in the final show of the second series, a staggering 400 million viewers. During the show’s third series, “voters” sent millions of text messages prompting cultural critics to laud Supergirls as China’s biggest-ever experiment in grassroots democracy. In a country where branding is still in its infancy, the show was an unprecedented marketing coup and helped secure Mengniu’s position at the cutting edge of advertising.

This might seem a surprising role for a dairy company. In China, however, milk has become inextricably linked to modernity.

Chinese cuisine is notoriously wide-ranging. “We eat everything with four legs that isn’t a table,” goes the familiar saying, and “anything that flies that isn’t a plane.” Yet, while it has succeeded in incorporating all manner of bugs and beasts, there are still no cheese fillings or cream sauces in Chinese food.

Traditionally, this disdain for dairy has been a source of cultural pride since the tea-drinking Han sought to distinguish themselves from the milk-drinking barbarians. Foreigners, it was believed, could be easily identified by their buttery, cheesy or milky smell.

As China’s doors were opened to the outside, however, and the country began to wonder why it was weak when so many others were strong, the wisdom of the nondairy diet came under fire. The argument was increasingly heard: if China was to match the vitality of the imperial powers, it was essential that its people start drinking milk. Despite this new cultural imperative, for decades consumption was curtailed by poverty. During the Mao era milk was heavily rationed, a luxury that few could afford. Once the country began its policies of openness and reform, however, the milk-drinking campaign exploded.

Since many Chinese adults are lactose-intolerant, the dairy industry focused predominantly on children, since they were not only the prime consumers of milk but also had yet to build up intolerance. The goal was to encourage an early shift in diet that would, ultimately, alter the biology of the population. In China it is widely believed that the Japanese are taller and stronger because they drink more milk. Strengthen the child, and you will strengthen the nation.

The dairy companies, whose origins typically lay in the grasslands of Mongolia, emphasized this ancestry in order to reinforce the same association. Their ads and packaging sought to contrast the rugged health of life on the steppes with the decadent softness of the industrialized urban core (where most of their customers, of course, reside).

The widespread receptivity to this cultural message is evident in the astonishing popularity of Wolf Totem, a novel that contrasts the weakness of the Han with the vigor of the Mongolian nomads. Wolf Totem is said to have been China’s second most widely read book ever, beaten only by Mao’s Little Red Book.

Throughout the past decade, public health campaigns have celebrated the virtues of milk. “I have a dream,” said premier Wen Jiabao on a visit to a dairy farm in 2006, “that all Chinese, especially children, will have sufficient milk each day.” Consumption has been encouraged in schools. When China was gripped by the SARS scare the health properties of milk were especially promoted. In recent years, prompted by these health campaigns, as well as by convenience and cosmetic factors, many middle-class mothers have shifted away from breast-feeding to formula.

In an effort to capitalize on this promotion of both individual and national vitality, dairy ads regularly feature star athletes and patriotic heroes. Mengniu, for example, has a famous product tie-in with the astronauts of the Shenzhou space rocket. Yili, another large dairy producer, sponsors the celebrity hurdler Liu Xiang. This potent mixture of health and patriotism has helped make China home to the fastest-growing dairy market in the world.

It was thus especially ironic that in the afterglow of the Olympics (and a record number of Chinese gold medal wins), the country was suddenly shattered by a crisis in its dairy industry.

The production and distribution of milk in China involves a large number of small and highly distributed players. In September it came to light that somewhere in this complex business chain melamine, a chemical commonly used in plastics and fertilizers, had been added to the milk supply.

At the center of the crisis was one company, Sanlu, whose baby formula was found to contain high levels of melamine. As the investigation spread, however, traces of the chemical were discovered in formula, liquid milk and milk candy from almost every dairy producer in the country.

Melamine boosts the protein count in milk, allowing unscrupulous traders to disguise a watered-down supply. When ingested in high doses, it also causes crystals to form in the kidneys and eventually leads to kidney stones. A week after the crisis broke, four children were dead and more than 50,000 had been sickened by the country’s contaminated milk.

As the crisis unfolded it followed an all-too-familiar pattern.

The numbers of those affected jumped suddenly, from 6,000 to more than 50,000, within a couple of days. There were widespread recalls in China and boycotts of Chinese-made goods throughout the rest of the world.

Stories of a cover-up soon emerged. An investigation uncovered health complaints over Sanlu milk powder dating back at least eight months. Parents’ concerns had been ignored. Company employees delayed telling local officials, who themselves waited to tell their superiors. The public was kept in the dark until well after the Olympics were over.

A New Zealand company, Fonterra, which owned a 43 percent stake in Sanlu, was implicated in the cover-up, but in the end it was the New Zealand government that finally told officials in Beijing of the suspected contamination. Once the story broke there was mass public outcry, and heads began to roll. First, the boss of Sanlu and several local officials were fired and detained. A few days later Li Changjiang, the head of the Chinese agency that monitors food and product quality, was forced to resign. While this was no doubt a necessary measure, it did little to reassure an outraged public, especially since only a year earlier the former head of China’s food and drug agency had been executed for corruption in a similar scandal, which also involved melamine.

The milk crisis is still unfolding. There are daily reports of the widespread use of melamine in China and further boycotts worldwide. It is unclear what the long-term effects will be. Nevertheless, it is apparent that this crisis touches upon precisely those issues that a post-Olympic China must face in order to grow.

First, it involves, in a very intimate fashion, the disparate populations–rural and urban, rich and poor–that the government is so desperate to “harmonize.” Official reports veer between sympathy for the dairy farmers and concern for urban middle-class consumers. Any long-term solution will have to placate one group without unduly harming the other.

Second, crises of quality control have a crucial impact on China’s role in the global economy. Since China’s export-driven rise rests on its position as a manufacturing hub, continuing reports of toxic products are particularly damaging, through their impact upon the made-in-China brand.

Responding to the crisis, an official in the agriculture ministry has admitted that “the milk procurement sector is basically uncontrolled” and vowed more stringent regulation. Yet this promise has been made before. The dairy industry, like much else in China, is rife with corruption. It is claimed that the silence of inspectors at Sanlu as well as parents of affected children were bought with bribes.

Only weeks after the leadership in Beijing was praised for the spectacular success of the Olympic Games, the milk crisis revealed the shortcomings of a political system that is grappling with reform. Critics have been quick to suggest that until the government allows more openness, transparency and media oversight, new crises of this type are inevitable.

Here the story so far is mixed. While reports of tainted milk were published in the local press, all news from inside China came from only a few trusted agencies. The content of these reports was strictly regulated by communiqués issued by the propaganda department (some of which circulated on the Internet). Less than two weeks after the story came to light, an initial wave of aggressive coverage gave way to comforting reports about forceful government intervention, as well as articles that focused on the health benefits of milk.

In cyberspace, however, things have unfolded quite differently. From the moment the story appeared, the Chinese blogosphere was flooded with black humor. Images of grotesque monsters promoting baby formula appeared alongside a host of Photoshopped spoof versions of Sanlu ads. A satirical diary was widely circulated that horrifically detailed the daily dose of toxins that everyday life in China entails. Fu Jianfeng, an editor at Southern Weekend–one of the most respected papers in the country–blogged about his frustrations in trying to report the case, his inability to access information and the impossibility of investigating Sanlu during the pre-Olympic crackdown. Meanwhile, netizens heatedly debated rumors that Sanlu had paid Baidu, China’s biggest search engine, to filter information on the crisis. Paradoxically, this uproar over the lack of information is itself an encouraging sign of the country’s increasing openness.

In developed markets, brand image and share prices also play an important part in the protection of public safety. Quality matters to manufacturers, since when products are found to be defective, or toxic, companies collapse. In China, too, it seems, rising brand consciousness will have a growing effect of this kind. Few think the Sanlu brand will recover. Sanyuan, however, the one major Chinese dairy producer to have consistently tested clean, has seen its milk sales triple and share prices soar. (It is in talks to buy out Sanlu.) Mengniu, which was implicated in the scandal, attempted a Western-style publicity stunt aimed at restoring consumer confidence. Soon after traces of melamine were found in its products, the CEO appeared in public drinking a box of milk and promising extensive compensation for anyone harmed by the company’s products.

Increased openness and transparency, a regulatory system that is free of corruption and companies that are forced by both the market and the government to act responsibly are all fundamental to China’s continued growth. Yet as the references to Confucius, calligraphy and kung fu in the opening ceremony of the Olympics made clear, modernity in contemporary China also involves a return to tradition. Here, too, it seems the milk crisis is playing an important role.

Scrambling for alternatives to local milk, many customers turned to the burgeoning organics market and others switched back to soy milk, a traditional Chinese drink. In the days following the crisis stocks in Vitasoy jumped more than 9 percent.

There are also reports of a sudden and booming industry in wet nurses. One entrepreneurial breast-feeding mother has offered to sell her surplus milk and feed an infant for 300 RMB a day. Her ad was posted online.