China is broken. Business Week reached that conclusion almost a month ago now. How badly is it broken? Can China be fixed? If it was fixed, what would it look like? Those questions have filled up a lot of news and blog space in the past weeks...

The Business Week cover story lists three main problem areas in China. The environment is growing consistently worse in the face of increasing industrialization. Irrational exuberance in stock speculation has made China's stock markets too volatile. And China's can't seem to police the behavior of its corporations; with an increasingly open market and growing international business cooperation, that has the potential to become a diplomatic issue.

One source said that China's problems with quality control could by themselves prevent the country from becoming a true world economic power in the near future. Perhaps that's an exaggeration; it certainly begs the question of how big an economy has to be to qualify as a world power.



If you don't believe China is serious about fixing its problems, consider who is in charge now of that task: Vice Premier Wu Yi (pictured), China's most successful troubleshooter, was named last as head of a cabinet level panel to address the issues of standards, product safety, and quality control in China's food industry. In the words of the nice bloggers at China Business Service, "Wu Yi Means It's Serious." It was Wu Yi who was sent to fix the SARS crisis. She is Beijing's "Iron Lady."

What exactly is the problem with China's food industry? Bloomberg News described the state of the export food industry in China:

In the report Friday, the government reiterated previously released figures that 99.2 percent of Chinese food shipments last year to the United States met American standards. That compares with the 99.9 percent pass rate for exports to the European Union and 99.4 percent to Japan, the report said.

To improve quality, the Chinese government plans to force small producers to combine into larger, better-financed groups that can afford to increase quality and safety measures.

Almost 80 percent of China's food producers are small shops employing fewer than 10 workers, producing less than 10 percent of the goods in the industry, according to the report.

The Bloomberg article went on to say that about 30 percent of China's small producers failed to meet quality standards last year. Thus the emphasis on merging small producers into larger ones.

While China's export food industry may in fact be relatively safe, a recent article by the Guardian note that food products made for domestic consumption were in China were less safe. About 15% of food products in the first half of this year failed to meet quality standards. That's an improvement; last year the over 22% of food products made for domestic consumption in China failed to meet Chinese safety standards.

The ultimate problem China faces is really a simple one, summed up well in the Business Week piece:

China observers dismiss these flaws as the growing pains of a nation making a breathtakingly fast transition from a command economy to a free market. But now it's becoming clearer that these and other structural problems aren't being addressed. The same policies that have been so successful at boosting the gross domestic product by developing new export industries and public works projects, it turns out, undermine initiatives that might move China's economy to a higher level.

In other words, what got us here won't take us any further. It's time (again) for change. Perhaps "Iron Lady" Wu Yi can manufacture that change...