Zhang Jingfang, who had worked in Sanyuan testing products for 17 years, said the concept of honest operation was deep rooted in every Sanyuan employee. "We would rather suffer a loss than make profits through cheating," she said.

Nevertheless, ethics alone was inadequate. China drafted its first Food Safety Law, which was under the scrutiny of the country's top legislative body. In late October the draft underwent the third round of examination. As a consequence of the milk scandal, amendments were proposed.

Punishment would be harsher. A company engaged in illegal operation would have its business license revoked and the fine could be as high as ten times the value of related goods, in addition to confiscation of its illegal income.

Professor Jiang Ming'an of Beijing University said a company should be forced by law to make punitive compensation to food poisoning victims. The current compensation for consumers was barely enough to cover the medical cost. A large part of it, in fact, was paid by the government or public institutions, with taxpayers' money.

"Punitive compensation will greatly raise the law-violating cost of the company. It will also encourage consumers to stand up for their own rights," said Professor Jiang, who was a deputy to the Beijing Municipal People's Congress.

The Sanlu milk incident was a bloody crime, if one thought of the infants killed by kidney stones developed from drinking melamine tainted milk, and the tens of thousands of babies hospitalized for the same reason, which numbered 10,666 across the country as of Oct. 8.

The suspects detained in Hebei, if convicted, would be punished. So would, probably, board chairwoman of Sanlu Group Tian Wenhua, who is alleged to have tried to cover up the issue and was detained by Hebei police on criminal charges in mid-September.

The incident had led to the dismissal of a number of officials from prominent posts in the government of Shijiazhuang, capital city of Hebei Province, including two vice mayors. And Li Changjiang, director general of the General Administration of Quality Supervision, Inspection and Quarantine, had resigned because of the organization's disappointing regulatory work.

Sanlu doomed

Once a rising star in China's milk industry, Sanlu was devastated by the melamine scandal. Rumors flew in early October about the possible acquisition of Sanlu by Sanyuan. Although the latter refused to comment on the issue, the publicly listed firm stopped trading on account of that on Sept. 26. Both Sanyuan and Sanlu are state controlled. Sanyuan was better established, with a total assets of 1.3 billion yuan, while Sanlu's net assets reached 1.2 billion yuan before the scandal broke.

Reports said the move was pushed by the government. Negotiation had been tough because the local government wished the potential acquirer to shoulder Sanlu's debts too, while Sanyuan was interested only in good assets. At least one other company, the Hangzhou-based Wahaha Group, a privately owned firm that produced drinking water and milk drinks for children and was expanding into liquid milk and powder business, had wooed Sanlu.

According to the 21st Century Economic Report dated Nov. 3, deals had been reached for Sanyuan to purchase seven Sanlu core factories. Sanyuan appeared triumphant in the bargaining. Sanyuan might issue additional targeted shares and apply for a state loan to complete the acquisition.

The same report said WonderSun, a dairy producer based in northeast China's Heilongjiang province, was to take over a Sanlu milk powder factory in Mudanjiang. However, WonderSun had repeatedly denied the intention and the acquisition.

This was not the end of the Sanlu story. Rapidly expanding through investments, acquisitions and mergers, Sanlu had lined up nearly 30 factories under its name. Earlier, on Oct. 28 it was reported that seven non-core Sanlu factories had changed names and resumed operation. The fate of the remaining enterprises was yet to be decided.

The melamine scandal caused more casualties than just the Sanlu Group. A report from the government of Inner Mongolia in north China showed the region's two leading milk producers, Mengniu and Yili, had recalled melamine related products worth 6.4 billion yuan. Orders decreased 80 percent, daily collection of raw milk dropped by similar rates and the future loss was estimated to be 3.6 billion yuan.

Statistics released by the Ministry of Industry and Information Technology showed, up to Nov. 2, 128 of the 638 dairy producers in China remained closed.

Although a survivor of the melamine scandal, Sanyuan Foods general manager Niu Liping said the company shared the pains, because the whole industry was damaged. "With the skin gone, what can the hair adhere to," he said. Niu said he was worried over the future of the domestic milk industry.

He did not believe there had been an unwritten rule relating to melamine dealing in the industry. With companies like Mengniu and Yili, he said, most of their products were still safe and good. He called on fellow companies to learn from the lesson. And he pleaded with consumers to retain confidence in domestic products. "It would take time for the dairy industry to overcome the difficulty," he said.

On another occasion amid the furore about the scandal, Zhang Fuping, board chairman of Sanyuan Group, which was Sanyuan Foods' parent company, was quoted as saying, "As a state owned enterprise, we have an unshakable responsibility to lead the industry to disciplined development and let consumers drink milk that is good for their health."

(Xinhua News Agency November 15, 2008)