The fall of a hundred-billion-yuan empire: where does the health products industry go?

1. The avalanche

On 25 December 2018 the WeChat account DXY published an article, "The hundred-billion-yuan empire Quanjian, and the Chinese families in its shadow", questioning the company's products and alleging false advertising, unlicensed medical practice and pyramid selling carried on in the name of traditional Chinese medicine. On 26 December Quanjian issued a "solemn statement"

declaring that the article was untrue and seriously infringed its lawful rights and interests. The Tianjin municipal government then formed a joint investigation team and sent it into the Quanjian group to carry out checks. On 1 January 2019 the Tianjin public security authorities formally opened an investigation into Quanjian on suspicion of organising and leading pyramid selling and of false advertising. On 7 January

eighteen people, including the company's actual controller and founder Shu Yuhui, were criminally detained in accordance with law. On 13 January the Wuqing district people's procuratorate of Tianjin approved the arrest of Shu Yuhui and 15 others, 16 people in all, on suspicion of organising and leading pyramid selling and other offences.

As the affair developed, those who had once shared Quanjian's interests hurried to distance themselves. The Jinan railway bureau of China Railway announced that it had ended the naming of its train sets after Quanjian and had removed all the branding; the Quanjian football club of the Chinese Super League was renamed Tianjin Tianhai; the Chinese Table Tennis Association announced that it too had withdrawn Quanjian's naming rights; and the central standing committee of the Chinese Peasants and Workers Democratic Party

removed Shu Yuhui from his post as a member of its central committee and expelled him from the party.

In a mere 21 days the hundred-billion-yuan empire came down, setting off a storm of public comment in China and once again bringing the public's anxiety about medical safety to the surface.

2. The regulatory gap

That China has entered an ageing society is beyond dispute: by the end of 2017 the population aged 60 and over had reached 241 million, or 17.3 per cent of the total, and by around 2050 it is expected to reach 34.9 per cent. With ageing under way and an interest in health and wellbeing on the rise, the health products industry

has steadily grown. Retail sales of health foods alone exceeded 200 billion yuan in 2018. Behind the industry's growth, however, lie unchecked unlawful practices, of which false advertising is one of the most typical.

On the information disclosed by DXY, Quanjian presented its health products as medicines capable of treating leukaemia and even cancer. Under Article 48, paragraph 2, of the Drug Administration Law of the People's Republic of China, a non-drug passed off as a drug, or one drug passed off as another, is a counterfeit drug. Article 18 of the Advertising Law of the

People's Republic of China likewise provides that advertisements for health foods may not contain assertions or guarantees of efficacy or safety, may not contain anything relating to the prevention or treatment of disease, and must conspicuously state that the product cannot replace medicines. The law, then, is clear that sellers of health products

may not exaggerate or advertise falsely, and may not state or imply to consumers that a health product prevents or cures disease. Why, then, does the practice persist?

According to the available material, Quanjian was drawn into disputes over its health products several times over more than a decade, and each time emerged unscathed. Because it operated by direct selling and joining required no contract, the money and other dealings were often in the hands of distributors, and once a dispute arose the company would say that it knew nothing

and push responsibility onto the distributor. For a long time the distributor network was Quanjian's shield against legal liability.

China's former regulatory system laid emphasis on approval in advance and was not strong enough on supervision during and after the event, and enforcement was wanting too. It was this absence of supervision and the weakness of punishment that gave Quanjian its opportunity to make its fortune. As CCTV put it in its commentary, the purpose of establishing regulators and giving them their functions is to discover, judge,

govern and regulate promptly conduct in the market that disregards rules and order. To fail to discover it in time is a dereliction of duty; to discover it and ignore it is misconduct in office; and to discover it, or to know that it is pyramid selling and still collude in it, is not only misconduct in office but may amount to bribery.

Justice may be late but it does not fail to arrive. Here, however, the late arrival of justice cost too many patients and families dearly. Faced with illness people are commonly helpless and at a loss, which is how the unscrupulous find their way in; regulators, however, must never leave them a way in. The rise and fall of Quanjian surely

teaches regulators a lesson. It matters that consumers keep their eyes open, but it matters more that the market be kept clean. Had it not been for this wave of public criticism, how long would it have taken to discover the dark corners of the Quanjian empire? Faced with the disorder in the health products industry, the departments concerned must not run along behind public opinion; they should take the initiative and

restore to consumers a market that is safe and reassuring.

3. Where does the industry go?

One Quanjian has fallen, and plenty of similar companies remain at large. From Shapu Aisi to Hongmao medicinal liquor to Quanjian, exposed today, these are only the tip of the iceberg. Each time the media report developments with passion and the public denounce the companies involved with indignation, and yet history

repeats itself, with only the company and product names changing. The anger of victims and the wave of media criticism may have a shelf life; damage to people's health and lives, once done, is hard to undo.

There is no time to lose in cleaning up the health products industry and improving the rules on supervision and review: only severe punishment under the law will deter companies with unlawful intentions. It matters just as much to improve the public's, and especially older people's, knowledge of medicine, and a health consciousness across society requires everyone to press it forward, through disclosures by internet users, follow-up reporting by the media and the intervention of

judicial organs. Building a healthy China is a long and heavy task, and only when every force in society truly wakes up can the social environment be thoroughly cleansed.