The Government Pension Fund in Chinese Milk Scandal

                                                            (First published in Norwegian 23 Sept 2008) 

By Pia A. Gaarder
Norwatch  

Milk products from 22 Chinese companies have been withdrawn from the market, and included among these are also products from China’s largest milk producer, China Mengniu Dairy Company. This Chinese giant was formed in 1999 and listed on the Hong Kong stock exchange in 2004. The Norwegian Government Pension Fund – Global is among the company’s shareholders and has invested NKR 93,944,000 million (11,2 million euros) in the company.

The Chinese Department of Health is said to have confirmed that 13,000 children have been hospitalised and that 40,000 have received treatment. Four children have died. It is suspected that melamine has been added to the raw milk or the milk powder to make the protein contents seem higher. The “quality” of the product would then appear to be better, and any possible dilution of the raw milk would be concealed.

According to Reuter’s, China Mengniu Dairy is number seven on the list of the worst companies in the milk scandal with regard to melamine in the products. Three of the tests from the company were positive. At the top of the blacklist is the partly state-owned company Sanlu, in which the dairy giant Fonterra from New Zealand owns 43%.        

China Mengniu Dairy is also a partner of the Danish company Arla Foods, which thereby has been directly drawn into the Chinese milk scandal. The joint venture company Mengniu Arla was established 3 years ago by China Mengniu Dairy (51%) and Arla (49%). The company was to produce milk powder in consumer packaging for the Chinese market.

Arla Foods disclosed in a press release that China Mengniu Dairy is now examining all their subsidiaries and that production at Mengniu Arla’s milk powder factory has been temporarily suspended.

The Danish food company wrote further that the authorities have for the time being concluded that the poisonous chemical substance was added at the milk collection centres – that is, not at the diaries where the dry milk and other milk products are produced

But there is still suspicion that melamine has also been added to the milk powder.

“To secure the Chinese milk farmers’ livelihood, Mengniu Dairy will continue to receive and pay for the milk that the company’s suppliers deliver, so long as the milk does not contain melamine,” Arla Foods reported.

The Danish company does not, however, report how the milk is to be tested now or why China Mengniu Dairy has not routinely and thoroughly checked the quality of the milk used in the production at the subsidiaries.

About Melamine
 * Melamine is extracted from coal. 
 * China is the world’s largest producer and exporter of melamine.
 * Melamine is utilised for surface treatment of plastic and other materials.