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Fearing contamination, Chinese pay more for imported infant goods

A family looks at foreign imported milk powder products at a supermarket in Beijing July 3, 2013. REUTERS/Kim Kyung-Hoon
A family looks at foreign imported milk powder products at a supermarket in Beijing July 3, 2013. REUTERS/Kim Kyung-Hoon

By Melanie Lee

SHANGHAI (Reuters) - Sophie the Giraffe is a teething toy taking over the world one baby mouth at a time. The toy, handmade in France from Malaysian rubber sap, is the rage for parents of toddlers the world over, including China.

But the knobby chew toy is priced around $30 in China, nearly three times the price in France. It's not a shock for Chinese parents, who have long lived with imported baby products that are sharply more expensive than elsewhere in the world.

Last week, Chinese authorities began an investigation into possible price-fixing and anti-competitive practices at five foreign companies manufacturing infant formula milk, including Nestle SA, Abbott Laboratories, Mead Johnson Nutrition Co, Danone's Dumex brand and Wyeth Nutrition.

Several other products aimed at infants and toddlers appear to be exorbitantly priced in China. Import duties are only a part of the reason, experts say - much of the premium for imported infant products can be ascribed to fears that locally made goods may be contaminated.

Chinese parents, who are mostly only allowed to have one child, simply do not want to take the risk of possible contamination in local baby products.

Foreign companies know this and many take advantage.

"Brands have been able to get away with this just because of the fear factor about buying unsafe products," said Benjamin Cavender, principal analyst at China Market Research Group.

"If you look at how consumers spend their money, they are disproportionately willing to spend money on anything that their child will be eating or what will be touching their child's body."

In 2008, six infants were killed in China and thousands fell sick after consuming milk tainted with melamine. There have been several food scandals in recent months, involving rat meat in mutton, excessive hormones in chicken meat and toxins in rice.

But when it comes to children, the fear of domestic goods goes beyond food to items like toys and diapers. Many local toys have been found to have toxic levels of substances like lead, arsenic and mercury.

For many Chinese and expatriates living in China going to Hong Kong or overseas for holidays, the shopping list includes diapers and infant formula, and they buy in bulk.

In March, Hong Kong passed a law that classified milk powder as a restricted export, alongside items like rough diamonds, mandating that anyone without a license caught exporting more 1.8 kg, about two cans of milk powder, will be fined or jailed. Security guards patrol shops at Hong Kong's international airport to make sure the rule is not broken.

In Britain, shops are rationing sales of baby milk after Chinese visitors and bulk buyers cleared their shelves to send the goods to China. Boxes of baby milk costing around 10 pounds ($15) in Britain are on sale on Chinese websites for up to three times as much.

Other imported infant items are similarly marked up in China.

Sophie the Giraffe retails for about 8 euros ($10.33) on Amazon's French website.

Under Chinese law, Sophie would face an import duty of 10 percent if imported as a rubber item and a value-added-tax (VAT) of 17 percent. If it is imported as an animal toy, there is no import duty but the VAT still applies. Transport and distribution costs would also apply.

Shanghai Tongzhen Trading Co. sells the toy for $27 on Chinese e-commerce platform Jingdong Mall.

After China announced the investigation into infant formula, Swiss food company Nestle and French rival Danone said they will cut the price of the milk powder in China.

A can of Karicare Gold 3 infant milk powder from Nutricia, a unit of Danone, retails in New Zealand and Australia for around $19. In China, the official Nutricia store on the online Taobao Mall sells one can for 190 yuan ($31).

The VAT is still 17 percent but import duty for milk powder stands at only five percent.

Cai Junfang, a Shanghai woman who has a two-month old baby girl, says she manages the high prices by breastfeeding and using local diaper brands.

"The prices of imported baby goods are indeed very high," said Cai, adding that the quality of imported goods was however generally better than domestic products. But when it comes to her baby's milk formula, she's not taking chances.

"There has been too much media exposure on the domestic formula safety. The most important thing is my baby's health," she said.

(Additional reporting by the Shanghai newsroom; Editing by Raju Gopalakrishnan)

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