Young dairy market was on fast track to tragedy

Like many Chinese peasants of his generation, 53-year-old Wang Zhengnian had never seen a cow until he reached adulthood. He certainly never drank a glass of milk.

The fact that Wang now spends his days tending 400 cows on a farm near Beijing says a lot about the way China created a dairy industry out of thin air. But in their haste, the Chinese made mistakes that left six babies dead and hundreds of thousands ill from tainted milk.

Milk is not part of the traditional Chinese diet. Most Chinese adults are lactose-intolerant and many are repelled by the smell of dairy products.

But in the 1990s, economic planners decided that dairy cows were a quick way to improve rural incomes, particularly in northern provinces such as Hebei, Inner Mongolia and Heilongjiang with cool climate, flat terrain and lack of other economic prospects. To encourage consumption, the propaganda machine spread the word that children needed to drink milk to grow as strong and tall as Westerners.

In a landscape that looks more Rust Belt than Dairy Belt, people opened farms in patches of land between derelict factories and villages.

“Cows have been good for us,” Wang said as he whistled for his herd to come in for milking last week in Xingtang County, 170 miles southwest of Beijing. “The business is bad right now because of the scandal, but it was great before.”

The now-bankrupt dairy producer Sanlu Group, headquartered in Shijiazhuang, capital of Hebei, was a big reason for the success. Company Chairwoman Tian Wenhua was a Communist Party official, but also a reformer. She now faces life imprisonment for covering up the scandal over Sanlu’s tainted milk.

To make the dairy industry more efficient and spread the wealth, she encouraged peasants to raise cows. A dairy cow costs about $1,200, and those who couldn’t afford them got loans. If they didn’t qualify for a loan, they acquired their cows on a rent-to-own plan.

At the time of communist China’s founding in 1949, the country had about 100,000 dairy cattle, many of them descendants of cows introduced by Christian missionaries. By last year, there were an estimated 14 million. Most were in the hands of small-scale dairy farmers who kept only a few, milking them by hand and selling the product at a milking station, which resold it to large companies.

As Tian was promoting production, the government was pushing domestic consumption.

“I have a dream,” Premier Wen Jiabao said during a 2006 visit to a dairy farm, “that every person in China, especially the children, could afford to buy 1 jin [about a pint] of milk every day.”

People who once gagged at the smell of cheese now ate pizza. Busy office workers in Beijing and Shanghai got into the habit of buying yogurt at 7-Eleven, instead of traditional food like rice porridge. Women rushing back into the work force after childbirth were proud that they could afford baby formula.

From 1998 to 2007, domestic consumption increased fivefold and China became the fastest-growing producer in the world. But farmers were still amateurs when it came to raising dairy cows.

Chinese peasants lacked experience with the animals, said Chen Yu, a professor at a think tank affiliated with the Agriculture Ministry. “They didn’t have the right food for dairy cows. They didn’t understand the technology of milking or transporting milk.”

The milk business started to become challenging in 2006. Prices for feed spiked, while milk prices were kept down by government controls and cutthroat competition. Sanlu paid dairy farms less than 7 cents per pint of milk.

At the bottom of the supply chain, many farmers who had sold their homes or borrowed money to buy their cows now slaughtered the animals for money. Or they cheated.

The most common way was to water down the milk and use additives to conceal it. Melamine, which is used in making plastics and not intended for human consumption, allows diluted milk to pass quality tests for protein. Although it was known to cause kidney stones and had been banned from pet food, milk dealers preferred it to food additives like hydrolyzed animal protein because it was tasteless and odorless.

Inside a nondescript Xingtang storefront, former dairy company employee Xue Jianzhong opened a shop in 2007 to sell what he called “protein powder.” It was in fact a concoction of melamine and malt dextrin that had been created by local chemist Zhang Yanjun, prosecutors said. Over the next nine months, they sold $180,000 worth of the powder -- 110 tons.

By the time China’s food regulators busted the Xingtang gang and others like it around the country, six babies were dead or dying and hundreds of thousands were sick.

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barbara.demick@latimes.com

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Eliot Gao of The Times’ Beijing Bureau contributed to this report.