SLOW, STEADY APPRECIATION OF CHINESE YUAN CONTINUES

U.S. Treasury Secretary Henry Paulson wrapped up his now twice yearly meetings with Chinese officials yesterday. Some progress regarding the appreciation of the Chinese currency, the yuan, and food and product safety for Chinese exports to the United States seems to have been made.

From Reuters:

"The Chinese recognize growing inflationary pressures in their economy and that a more flexible currency expands their ability to use monetary policy to stabilize their economy," Paulson said at a closing news conference.

China's central bank, which keeps the currency on a tight leash, let the yuan rise on Thursday to its highest level since it was revalued and depegged from the dollar in July 2005. The bank is battling inflation of 6.9 percent, an 11-year high.

A highlight of the talks was an agreement to increase safety standards for Chinese food and product exports to U.S. markets -- a highly sensitive topic after millions of Chinese-made toys were recalled and American indignity over tainted food and pharmaceuticals from China ran high.

I find it interesting that Paulson is stating that the Chinese recognize that a flexible currency allows them to better fight inflationary pressures. That is a concept that freshman business students seem to grasp, so I would hope that one of the world's economic powers understands it. They have tried fixing prices on some goods and raising the bank reserve rate to slow inflation. When will they try the more economically sound principle of a flexible currency?

As for the increase in safety standards for Chinese food and other products that are exported to the United States, there was plenty of room for improvement. We will have to wait and see if the reports of unsafe Chinese products decrease.

AQUA DOTS TOYS RECALLED AFTER CAUSING COMAS

From CNN.com:

Millions of Chinese-made toys have been pulled from shelves in North America and Australia after scientists found they contain a chemical that converts into a powerful date rape drug when ingested. Two children in the U.S. and three in Australia were hospitalized after swallowing the beads.

With only seven weeks until Christmas, the recall is yet another blow to the toy industry -- already bruised by a slew of recalls this past summer.

In the United States, the toy goes by the name Aqua Dots, a highly popular holiday toy distributed by Toronto-based Spin Master Toys. They are called Bindeez in Australia, where they were named toy of the year at an industry function earlier this year.

It could not immediately be learned whether Aqua Dots beads are made in the same factories as the Bindeez product. Both are sold by Australia-based Moose Enterprises.

The toy beads are sold in general merchandise stores and over the Internet for use in arts and crafts projects. They can be arranged into designs and fused together when sprayed with water.

Scientists say a chemical coating on the beads, when ingested, metabolizes into the so-called date rape drug gamma hydroxy butyrate. When eaten, the compound -- made from common and easily available ingredients -- can induce unconsciousness, seizures, drowsiness, coma and death.

Naren Gunja from Australia's Poisons Information Center said the drug's effect on children was "quite serious ... and potentially life-threatening."

The recall was announced by the Consumer Product Safety Commission on Wednesday several hours after published reports about the recall in Australia.

The two U.S. children who swallowed Aqua Dot beads went into nonresponsive comas, commission spokesman Scott Wolfson said Wednesday afternoon.

In Australia, the toys were ordered off store shelves on Tuesday when officials learned that a 2-year-old boy and a 10-year-old girl were hospitalized after swallowing the beads. A 19-month-old toddler also was being treated.

BUSH ADMINISTRATION TO PUT FORWARD CONSUMER SAFETY PROPOSALS

From The New York Times:

The Bush administration on Tuesday will propose a significant expansion of the authority of the federal drug and consumer product safety agencies to inspect and certify imports, White House and other administration officials said Monday.

A White House official said a major part of the plan would entail stationing inspectors in foreign countries to examine drugs, food and other potentially dangerous products before they were shipped to American shores. The official said that with $2 trillion in imports annually, inspections at the ports had become ineffective.

The official said the plan would give the agencies the authority to certify the safety of products and to list certified products on a Web site that could be viewed by consumers.

Officials said that the plan would require significant budget increases for the Consumer Product Safety Commission and the Food and Drug Administration.

In Congress last Tuesday, the Senate Commerce Committee approved without objection legislation that would increase penalties, let the product safety agency publicly disclose reports of defective products and increase the maximum penalty on violations to $100 million, from $1.8 million.

Senior Democrats in both houses called for the resignation of Nancy A. Nord, the acting head of the Consumer Product Safety Commission, after she sent letters to Congress vigorously opposing the legislation. Ms. Nord’s letters closely resembled complaints raised by a coalition of manufacturing associations.

At the urging of industry groups, the White House has objected to a provision that would reward industry whistle-blowers for reporting defective products and another that would give state prosecutors the authority to enforce federal safety laws.

Consumer groups and Democratic lawmakers say those provisions are vital in restoring the credibility of federal safety efforts, while White House officials say the measures would encourage frivolous litigation.

CONSUMER PRODUCTS SAFETY COMMISSION CHAIR: DO NOT INCREASE BUDGET OR STAFF

From The New York Times:

The nation’s top official for consumer product safety has asked Congress in recent days to reject legislation intended to strengthen the agency, which polices thousands of consumer goods, from toys to tools.

On the eve of an important Senate committee meeting to consider the legislation, Nancy A. Nord, the acting chairwoman of the Consumer Product Safety Commission, has asked lawmakers in two letters not to approve the bulk of legislation that would increase the agency’s authority, double its budget and sharply increase its dwindling staff.

Ms. Nord opposes provisions that would increase the maximum penalties for safety violations and make it easier for the government to make public reports of faulty products, protect industry whistle-blowers and prosecute executives of companies that willfully violate laws.

The measure is an effort to buttress an agency that has been under siege because of a raft of tainted and dangerous products manufactured both domestically and abroad. In the last two months alone, more than 13 million toys have been recalled after tests indicated lead levels that sometimes reached almost 200 times the safety limit.

Ms. Nord’s opposition to important elements of the legislation is consistent with the broadly deregulatory approach of the Bush administration over the last seven years. In a variety of areas, from antitrust to trucking and worker safety, officials appointed by President Bush have sought to reduce the role of regulation and government in the marketplace.

MATTEL RECALLS MORE LEAD-TAINTED CHINESE TOYS

From USA Today:

Mattel announced another recall of lead-tainted toys from China late Tuesday, its third such announcement in about a month.

The recall of nearly 800,000 Fisher-Price and parent company Mattel-brand products includes Barbie accessories, such as lead-tainted puppies and cats; GeoTrax trains; and toy bongo drums. All were sold within the last year.

Children can get lead poisoning from sucking on or swallowing toys or jewelry with lead. Lead can cause learning and behavior problems and even death.

CHINESE GOVERNMENT DECLARES "WAR" ON TAINTED FOOD, DRUGS, AND EXPORTS

From Reuters:

China has launched a four-month "war" on tainted food, drugs and exports, state media reported on Friday, as beleaguered officials embraced time-tested campaign tactics to clean up the country's battered image.

Chinese Vice Premier Wu Yi told officials that the campaign, to run to the end of the year, would focus on problem products that have corroded domestic and foreign consumers' confidence in the "made in China" label.

"This is a special battle to protect the health and personal interests of the public and to protect the reputation of Chinese goods and the national image," Wu said, according to the government Web site (www.gov.cn).

She called the campaign a "stern political task" -- a reminder that officials' careers may be on the line.

Wu announced targets to clean up pig slaughtering, restaurants and canteens, pesticide use, food additives and the country's vital exports. "In some businesses the management level is low, production conditions are poor, quality levels and standards are low, and reliability is weak," she said.

Local officials may not share Wu's determination to move so fast, said the China Daily.

"Building an omnipresent monitoring and guarantee mechanism will prove a challenging mission for a four-month campaign," the paper said.

WAL-MART PET FOOD FROM CHINA FOUND TO HAVE MELAMINE

From USA Today:

Tests of two Chinese brands of dog treats sold at Wal-Mart stores found traces of melamine, a chemical agent that led to a previous, large-scale pet food recall in March, a spokeswoman said Tuesday.

Wal-Mart Stores stopped selling Chicken Jerky Strips from Import-Pingyang Pet Product and Chicken Jerky from Shanghai Bestro Trading in July, after customers said the products sickened their pets.

No recall was announced at that time, but Wal-Mart said in a statement Tuesday that customers who bought one of the products should return it to the nearest store for a refund.

Company spokeswoman Deisha Galberth said 17 sets of tests done on the products found melamine, a contaminant that's a byproduct of several pesticides.

The Delaware County (Pa.) Daily Times reported last week that a woman claimed her 2-year-old Chihuahua died after eating some of the products.

CHINESE STATE TV DEFENDS CHINESE-MADE PRODUCTS

From USA Today:

Chinese state television has launched a week-long series of programs dedicated to defending the country's reputation as a safe maker of global goods, pushing forward its campaign to woo back international trust.

The first program was aired Sunday on China Central Television's economic channel and featured the head of a quality watchdog criticizing the recent furor over the quality of Chinese exports as "demonizing China's products."

"Personally, I believe it is new trend in trade protectionism. Although recalls are necessary, it is unfair to decide that all products made in China are unqualified," Li Changjiang, director of the General Administration of Quality Supervision, Inspection and Quarantine, said on the inaugural 90-minute show, titled "Believe in Made in China."

The programs are the latest in China's recent push to prove it is a safe manufacturer and exporter of goods amid discoveries of high levels of chemicals and toxins in Chinese products by countries around the world, from toothpaste to fish.

On Monday, New Zealand launched an investigation after children's clothes from China were found to contain dangerous levels of formaldehyde.

The government ordered the probe after scientists testing clothes for TV3's "Target" consumer watchdog program discovered formaldehyde concentrations up to 900 times above the safe level in woolen and cotton clothes.

The chemical gives a permanent press effect to clothes and is also used as an embalming fluid. It can cause problems ranging from skin rashes to cancer.

The television station says it will not release details of brand names or importers ahead of the show's airing on Tuesday.

MATTEL CHINESE-MADE TOY RECALL UP TO NEARLY 19 MILLION

From CNN Money:

Mattel Inc. Tuesday recalled more than 9 million toys made in China and sold in the United States, including "Polly Pocket" and "Batman" dolls and other popular figures, because of loose magnets and lead paint - its second major recall in less than a month.

The recall affects 9.58 million imported toys sold at toy stores, discount stores and other retailers nationwide dating back as far back as May 2003. Worldwide, Mattel said the recall includes nearly 19 million toys. The company said the recalls would cost about $30 million.

The recall is the latest development in the growing crisis over the safety of Chinese products. Chinese officials have gone out of their way to stress the safety and quality of its exports, blaming the problems on a small number of companies. Earlier this month, China's Commerce ministry blacklisted 400 export firms following the recent product safety scares.