VZCZCXRO7642
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0487/01 2240933
ZNR UUUUU ZZH
R 110933Z AUG 08
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 7499
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEAUSA/DEPT OF HHS WASHDC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASH DC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC

UNCLAS SECTION 01 OF 02 GUANGZHOU 000487 
 
SENSITIVE 
SIPDIS 
 
STATE PASS CONSUMER PRODUCTS SAFETY COMMISSION RICH O'BRIEN/INTL 
PROGRAMS 
STATE PASS USTR CHINA OFFICE 
STATE PASS HOMELAND SECURITY COUNCIL 
STATE PASS IMPORT SAFETY WORKING GROUP 
 
E.O. 12958: N/A 
TAGS: ETRD EIND TBIO ECON PGOV CH
SUBJECT: Guangdong's Cosmetic Makers Sees Stronger Safety Regulation 
for Exports, Not for the Domestic Market 
 
REF: 07 GUANGZHOU 966 
 
(U) This document is sensitive but unclassified.  Please protect 
accordingly. Not for release outside U.S. government channels. Not 
for internet publication. 
 
 
¶1. (U) Summary: The Chinese government's regime for protecting 
consumers from unsafe cosmetic products has strengthened in the last 
year -- foreign consumers that is.  Executives in Guangdong's 
cosmetic manufacturing industry point out that government testing 
and inspection of export products has increased but this has not 
necessarily been the case for products sold on the domestic market. 
In addition, some warn that intense price competition may be leading 
some manufacturers to cut corners when it comes to product quality. 
Manufacturers complain that the regulatory structure is too 
complicated, coordination between agencies is still lacking and some 
products may fall through the cracks in the oversight system.  End 
summary. 
 
A Stronger Product Safety Regime...for Some 
------------------------------------------- 
 
¶2. (SBU) Chinese government agencies have tightened testing and 
inspection regimes that monitor the safety of cosmetic exports over 
the last year, but, according to multinational and local 
manufacturers, little has changed in terms of monitoring products 
sold on the domestic market.  Lisa Wu, Manager of Regulatory, 
Compliance, and Analytical Science for Colgate-Palmolive 
(Guangzhou), told us that Colgate sees firsthand the disparity that 
exists in the treatment of its products for the two markets.  She 
noted that Colgate maintains a much closer relationship with 
Guangdong's China Inspection and Quarantine (GD CIQ) office, which 
is responsible for monitoring product quality for exports, than with 
the provincial Technical Supervision Bureau (GD TSB), GD CIQ's 
domestic counterpart, even though most of the products it makes here 
(about 60 percent) are destined for the local market.  According to 
Wu, GD CIQ takes samples from every shipment, but GD TSB visits the 
Colgate plant only twice a year. 
 
¶3. (SBU) Echoing Wu's comments, Bill Li, Procter and Gamble's (P&G) 
Associate Director for Regulatory & Consumer Relations in greater 
China, noted that over the last twelve months, his firm had observed 
much stricter regulation of products intended for foreign markets, 
with GD CIQ testing nearly every shipment.  In contrast, Jiang 
Shenxiao, the manager of Guangzhou Pure Cosmetic Co, Ltd., which 
sells only to the domestic market, said that he had not observed any 
stricter government regulation of his company's products in recent 
years. 
 
Price Competition Leading to Product Quality Shortcuts? 
--------------------------------------------- ---------- 
 
¶4. (SBU) At the same time, some producers warn that fierce price 
competition may be leading some manufacturers to cut corners on 
product quality.  Liu Dong, the manager of Colornow Cosmetics 
Limited, a Guangzhou cosmetics manufacturer, explained that his 
company is finding it difficult to expand domestic sales due to 
fieQindustry competition.  Liu argued that Colornow takes product 
quality seriously, pointing out that it sends every new product to 
SGS, an internationally renowned third-party testing company, and 
employs sophisticated, but costly, testing equipment.  However, he 
believes that smaller manufacturers would be unwilling to make a 
similar investment in quality assurance. 
 
¶5. (SBU) Guangzhou Pure Cosmetic's Jiang also commented that intense 
competition among international brands and thousands of domestic 
brands could affect quality.  Although he asserted that his company 
had not sacrificed product quality, he noted that there was strong 
pressure from increasing costs for labor and raw materials to 
consider doing so.  Jiang said that his company had reduced staff 
and eliminated some salary increases in order to cope with these 
rising costs. 
 
Complicated Regulatory System Causes Headaches... 
--------------------------------------------- ---- 
 
¶6. (SBU) Guangzhou's cosmetics makers complain that the complex web 
 
GUANGZHOU 00000487  002 OF 002 
 
 
of regulations and regulatory agencies that oversee product quality 
for the industry is not only confusing but also counterproductive 
because so many agencies perform similar functions.  Several 
executives pointed out that they must get both a production license 
from TSB and a sanitation license from the Guangdong Food and Drug 
Administration even though the procedures are similar and subsequent 
inspections by the two agencies are virtually identical.  P&G's Li 
commented that the central government should recognize that it has 
limited resources and thus should streamline the whole process to 
achieve its product safety goals.  He commented that the recent 
merging of State Food and Drug Administration (SFDA) into the 
Ministry of Health was a step in the right direction, but there was 
still a lot of overlap among different agencies. 
 
¶7. (SBU) Several companies highlighted regulations on labeling and 
advertising as particularly problematic, especially those governed 
by the Administration for Industry and Commerce (AIC).  According to 
Colgate's Lisa Wu, AIC is not adequately equipped to test the 
validity of advertising claims.  Even if the claims are supported by 
clinical studies conducted by third parties, AIC often rejects them 
and issues fines, she said.  She remarked that AIC had been slower 
to adopt a customer service mindset than other government agencies. 
Moreover, some executives expressed suspicion that AIC officials 
received bonuses based on the fines they levy. 
 
...and Creates Cracks and Loopholes 
----------------------------------- 
 
¶8. (SBU) With so many agencies and little coordination, it is not 
surprising that some things will fall through the cracks and that 
loopholes will emerge -- which is exactly what happened in the case 
of toothpaste and beauty salons.  AQSIQ has classified toothpaste as 
a cosmetic product since 2007.  However, the Ministry of Health, 
which oversees the local FDA offices, does not.  Guangdong FDA 
officials confirmed to us that because they do not classify 
toothpaste as a cosmetic, they are not responsible for regulating 
and supervising its manufacture.  Nevertheless, they told us that 
the agency had strongly recommended that toothpaste be classified as 
cosmetic because current government oversight for the product was 
not sufficient. 
 
¶9. (SBU) Colornow's Liu pointed out that a similar problem existed 
in the regulation of products sold at beauty salons.  He said that 
supermarkets and beauty salons served as the two major retail 
channels for hair products in China.  Supermarkets strictly control 
the labeling and packaging of products, but beauty salons actually 
have much lower standards, according to Liu.  He believes that this 
disadvantages consumers and the government should invest more in 
monitoring products sold through salons. 
 
GOLDBERG