Author: Sacha Cody, ANU

Officials, regulators and executives in China failed to learn important lessons from the 2008 dairy crisis, which caused the death of six infants and injured hundreds of thousands of others. A new scandal, this time engulfing the vaccine industry, has again produced the perfect storm comprising regulatory failure, unethical corporate behaviour and inadequate media scrutiny. Once again, Chinese citizens are left wondering who to trust.

In November 2017, the China Food and Drug Administration (CFDA) fined Changchun Changsheng Life Sciences Limited, one of China’s largest vaccine manufacturers, after discovering that 253,338 substandard doses of diphtheria, tetanus and pertussis (DTP) vaccine had been distributed and injected into approximately 215,000 children. In July 2018, further problems were discovered at Changchun Changsheng, this time concerning substandard rabies vaccines for humans. The firm was ordered to stop production.

A media frenzy followed. First, an exposé on WeChat, China’s popular social media platform, outlined the trajectory of Changchun Changsheng’s transgressions as well as the broader troubled history of China’s vaccine industry. The article clocked up over 5 million views before the authorities deemed it was a ‘violation of laws and regulations’ and deleted it. Shortly afterwards, both President Xi Jinping and Premier Li Keqiang condemned Changchun Changsheng and ordered an investigation, eventually rounding up 18 employees.

Three problems need to be addressed to avoid similar crises in the future. First, regulatory failure. The current vaccine scandal is not the first time that substandard vaccines have been in the headlines: there were also cases in 2010 and 2016.

What is causing such severe regulatory failure in China? Unusual appointments may be to blame: Sun Xianze, an official who was disciplined over the dairy crisis in 2008, became responsible for drug safety in 2014. It is also tempting to blame authoritarianism, corruption, local obstructionism or even lack of political will. Some of these are certainly observable in the current case.

But systematic research shows that the biggest regulatory challenge in China is one of scale. This refers to the inability to nest differing scales — national, provincial, county — inside a national and multilevel regulatory framework. When it comes to the vaccine scandal, the CFDA’s response appears rather tame. While Changchun Changsheng was forced to halt production of the rabies vaccine, the CFDA merely posted an online notice of the incident rather than initiate more systematic investigations involving other regulatory layers.

Second, unethical corporate culture. It is difficult to understand the decision-making process and corporate dynamics that led Changchun Changsheng to distribute substandard vaccines, fabricate production data, falsify inspection logs and pay bribes to government officials.

There are eerie similarities between Changchun Changsheng and the dairy companies who added melamine, a resin used to manufacture plastics, into their products in 2008 to increase the apparent protein content. At the time, dairy companies in China were riding high on burgeoning consumer demand and took dangerous short-cuts to profit financially.

Turning to vaccines, China has one of the highest vaccination rates in the world at 99 per cent (the global average is 85 per cent). Further, 95 per cent of vaccines are domestically produced and many are mandatory, including DTP. Meeting vaccination requirements while pursuing corporate targets seems to have trumped better decision-making by Changchun Changsheng executives.

Part of the problem in China is that official oversight of corporate governance only relates to the Chinese Communist Party’s authority and does not include other ethical dimensions. Here, China must learn from its pool of successful private firms. They tend to have more diversity across their leadership teams and greater independence, which provides important checks and balances in decision-making.

Third, inadequate media scrutiny. The vaccine scandal highlights the difficulty ordinary Chinese have obtaining accurate and reliable information. The fact that WeChat broke the story rather than official media fuels significant social distrust. Even though the WeChat article was criticised for lacking proper referencing, it only compelled readers to find out more.

In this climate, official responses carry little weight: they come late and offer empty promises. Indeed, netizens poked fun at the similarities between Premier Li’s response and the one he gave in 2016 following earlier vaccine problems. While this case shows that social media can still raise the alarm on important topics despite significant censorship, it only amplifies the lack of faith ordinary Chinese have in other institutions that should be protecting them.

Inadequate media scrutiny is perhaps the hardest of the three problems to solve. Chinese journalists are compelled to promote official narratives and investigative journalists have nearly all disappeared.

The current vaccine scandal is the result of a dysfunctional society. It could have been avoided if regulatory systems, corporate notions of right and wrong and inquisitive media did their job. But they all failed. If China can attend to all three of these problems, future crises can be avoided. But even fixing one may provide the requisite checks and balances necessary to stop it happening again.

Sacha Cody teaches anthropology at ANU and researches international Chinese firms’ corporate cultures.