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Cablegate: Got Milk? - Shanghai Thirsty for Foreign Imports

VZCZCXRO0919
RR RUEHCN RUEHGH
DE RUEHGH #0498/01 3190946
ZNR UUUUU ZZH
R 140946Z NOV 08
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7330
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEAUSA/DEPT OF HHS WASHINGTON DC
INFO RUEHBJ/AMEMBASSY BEIJING 2279
RUEHCN/AMCONSUL CHENGDU 1536
RUEHGZ/AMCONSUL GUANGZHOU 1507
RUEHHK/AMCONSUL HONG KONG 1698
RUEHSH/AMCONSUL SHENYANG 1528
RUEHIN/AIT TAIPEI 1329
RUEHGH/AMCONSUL SHANGHAI 7931

UNCLAS SECTION 01 OF 02 SHANGHAI 000498

SENSITIVE
SIPDIS

USDA FOR DLP AND FAS/OCRA/CHINA
HHS FOR OGHA/STEIGER, BHAT, ABDO AND PASS TO FDA/LUMPKIN
STATE FOR EAP/CM, OES/PCI, EEB/TPP/ABT
USDOC FOR ITA/MAC/OCEA SZYMANSKI

E.O. 12958: N/A
TAGS: ETRD ECON EAGR SENV TBIO CH
SUBJECT: GOT MILK? - SHANGHAI THIRSTY FOR FOREIGN IMPORTS

This message is Sensitive But Unclassified and for official use
only. Not for distribution outside of U.S. Government channels
or via the internet.

1. (SBU) SUMMARY: Shanghai stores have sold out of imported
milk in the wake of the recent melamine scandal. Chinese
authorities maintain that there has been no change in China's
import milk regulations, but some retailers and consumers
believe that a slowdown of imports is a deliberate move to
protect the domestic milk industry. The problem seems unique to
Shanghai, highlighting the differences in the local market
compared to other cities in China and may suggest a lack of
confidence in food safety measures among locals. At this stage,
the Consulate has seen no indication that the shortage of
imported milk is anything more than a supply and demand problem
brought on by hoarding. END SUMMARY.

2. (SBU) As a result of the early September revelation that
Chinese-produced milk and infant formula has been found to be
contaminated with the industrial chemical melamine, major
grocery stores around Shanghai have completely sold out of
imported UHT milk (ultra-high temperature processed milk, i.e.,
long-life boxed milk) during the week of November 10, with
scattered shortages noted earlier in the month. While large
quantities of imported boxed milk could be seen prominently
displayed in central locations in many stores in early October
(a month after the melamine scandal was reported in the media),
over the past two weeks all that can be found on shelves are a
few boxes of imported rice milk and even fewer boxes of
fortified soy milk. The unavailability of imported UHT milk has
caused some to suggest that the Chinese government is purposely
"banning" or "holding up" imported milk in an effort to protect
the domestic milk industry.

3. (SBU) Shanghai Consulate's Agriculture Trade Office
contacted ZHOU Guoliang, Director, Division of Supervision of
Animals and Plants, Shanghai Entry-Exit and Quarantine Bureau
(CIQ). He said that there has been no change in China's import
milk regulations. He indicated that CIQ has conducted random
checks on imported milk for melamine (as it has done for the
domestic supply since the dairy crisis first occurred), but
maintained that these quality supervision checks have not slowed
the release of foreign product onto the market and that no
foreign product has been found to contain melamine. (NOTE:
According to a local retail chain manager, CIQ inspects imported
milk products because some imports could incorporate milk powder
of Chinese origin. END NOTE.) Zhou also offered that some
commodity imports as a whole have declined recently, which he
attributed to the global financial crisis -- people have less
money in their pockets and therefore are buying fewer imported,
often more expensive products.

4. (SBU) The response from local grocery retailers has been
similar to CIQ. While some store managers at smaller shops
believe that there is a nefarious reason to the abrupt shortage,
most attribute the bare shelves to supply and demand. Local
retailers indicate that they just did not anticipate such a
steep increase in the demand for imported milk. Jina Jiang,
Import Product Manager from Carrefour, said that more stock is
on the way and that in the next week or so Carrefour would have
a more stable supply. Sherry Xie, a manager from the
Chinese-owned Shanghai specialty food retailer City Shop also
agreed that exporters could not meet the increasing demand;
however, she believed that the import inspection of dairy
products for melamine has slowed the release of imports onto the
Chinese market. Generally, the distribution system cannot
respond too quickly to an import shortage because demand for
dairy product worldwide is up and major exporting countries are
far from China.

COMMENT
-------

5. (SBU) Since other cities (such as Beijing and Guangzhou)
reportedly have imported milk still available in albeit limited,
but still sufficient quantities, it is interesting that this
shortage appears to be primarily a Shanghai problem. Shanghai
is a different market than other Chinese cities; it has a
sizeable expatriate population (approximately 134,000 registered

SHANGHAI 00000498 002 OF 002


foreigners as of 2007) and a local market historically more open
to Western ideas and products. With expatriates only accounting
for roughly 0.7 percent of Shanghai's 18.58 million official
residents, the run on milk suggests that locals may be
purchasing the imported products not just for affluence, but due
to a lack of confidence in food safety authorities who have
claimed that domestic milk is now perfectly safe for consumption.

6. (SBU) While some believe that the milk shortage is a result
of protectionist measures, we have seen no indication that this
is anything more than a supply and demand problem brought on by
continued distrust of local milk. We will continue to monitor
the situation to see if the stock of imported milk becomes more
stable in the coming weeks.
CAMP

© Scoop Media

 
 
 
 
 
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