Poultry Plant in Deadly Fire Won Plaudits From Chinese

June 4, 2013

Poultry Plant in Deadly Fire Won Plaudits From Chinese


BEIJING — A local Communist Party official called it an “inspiring” factory three years ago. Local officials later gave it the “leading enterprise” label for its innovation in processing chickens. But the official homages to the Jilin Baoyuanfeng Poultry Plant, where at least 120 people died this week in a fast-moving fire, now serve as little more than stark reminders of the blind eyes turned to the dangerous conditions facing many workers in China.

The tragedy, which some state media reports attributed to an ammonia leak, was China’s worst workplace fire in many years. That, coupled with the earlier glowing assessments of the factory, underscored how government regulation in China is weakened by an evaluation system that bases the promotion of officials on economic growth above virtually all else. How well companies expand the local economy trumps workplace conditions, product safety and pollution — top concerns for many ordinary Chinese and growing sources of unrest.On Tuesday, some relatives and friends of victims briefly took to the streets of Dehui in northeast China, where the factory was, to demand justice, prompting the police to fan out around the area, wire services reported. It was clear that the tragedy worried Chinese leaders, as Prime Minister Li Keqiang met with provincial officials at the emergency command center of the State Council, the official Xinhua news agency reported.

Accounts on the Internet from a handful of survivors painted a picture of mad attempts to escape an inferno consuming a warren of rooms and hallways. “Everyone was falling over in the corridors,” said Wang Xiujuan, according to a Xinhua report. “You tread on me, I tread on you. It was very chaotic. Everyone was crawling out, using all their might to crawl out.”

Tencent, a popular Internet portal, published comments by two survivors. One man, Guan Zhiguo, said the workers had not been warned about workplace hazards, including the ammonia.

“I am filled with hatred, but I don’t know toward what,” Mr. Guan said. “When I was running out, I saw a few women workers stuck behind a locked door. They were screaming their lungs out. It sounded so gruesome. The screaming lasted for about 10 minutes. The fire was too big for me to get close. Now, thinking back, my heart hurts for them.”

Chai Jinfeng, another survivor, said veteran workers had told her that the factory kept several doors locked to prevent workers from stealing. “The less doors, the easier it is to patrol,” she said.

The fire raised questions about whether government regulation was rigorous enough. The previous statements of support for the company, including recognition as a “top 100” agricultural firm in Jilin Province, are typical of the symbiotic ties between Communist Party officials and the businesses they are supposed to regulate. Such close working relationships have been a key to China’s successful transition from a socialist planned economy, but have also made industrial accidents, labor abuses and environmental hazards common.

“They’re really driven and focused on G.D.P. growth and bringing in companies that can help economic growth,” said Alex L. Wang, a law professor at the University of California, Los Angeles, who has studied the cadre evaluation system by which officials are promoted in China. “So regarding any measures that would increase the costs of doing business for these companies, the government will tend to remain more hands off.”

In October 2010, the head of the local anticorruption body of the Communist Party visited the Baoyuanfeng factory to research conditions, according to a statement from Dehui propaganda officials on the municipal Web site. The official, Zhao Wenbo, found the company’s “progress into becoming a nationally known enterprise and the growth of its production inspiring,” the post said.

A different post from the same year on the Dehui site asserted that “through an advanced management concept and business model, the company quickly entered into healthy development.” It said the Jilin provincial government had called the company one of the “top 100 agricultural processing companies,” while the provincial capital of Changchun labeled it a “leading enterprise” in agricultural industrialization, a title that it also held in 2011.

Despite such accolades, surviving workers from the factory said safety measures were poor or nonexistent, Chinese state news media reported Tuesday.

The pattern of officials’ ignoring safety problems at businesses they support can be found throughout China. Coal mines are among the most dangerous places to work, yet for years officials tolerated the hazardous operations of small mining companies because coal is a huge moneymaker. The central government has been pushing in recent years to shut down many of the small mines.

Officials often ignore lead leaks from battery makers and metal smelters, which poison residents. In Mengxi Village in Zhejiang Province, 233 adults and 99 children were found in 2011 to have high concentrations of lead in their blood because of runoff from a factory. Over six years, officials had ignored flagrant environmental violations there.

State-owned enterprises, like the big milk producers involved in the deadly 2008 melamine scandal, have even cozier ties to local officials and can push further on what is permissible.

Officials in Dehui have avoided granting interviews, but some details of conditions at the factory began to emerge in state media. Xinhua reported that Changchun officials had concluded that working conditions were too crowded, fire escape routes and procedures poor, and inspections substandard. Much of the factory had been built from flammable materials, so “the risk of fire was very large,” Xinhua reported.

Medical workers at the site found that a main cause of death was ammonia poisoning, Xinhua reported; many victims had swollen respiratory tracts. Witnesses had said Monday that they heard one or more explosions. A leak of ammonia might have caused the initial explosion, and then more gas leaked, according to state media reports.

Several survivors said in online reports that 300 to 400 workers were in the factory when the fire broke out.

Officials had not released details of the investigation or names of those under scrutiny. The 21st Century Business Herald reported that Baoyuanfeng’s legal representative was Jia Yushan, and that the company was founded in September 2009. Its net worth is 62 million renminbi, or more than $10 million.

A job advertisement that Baoyuanfeng posted online in April said the company had grown to $58.7 million in sales in 2011 from $31.4 million the previous year. The ad said the company was hiring 200 processing workers and offering a monthly salary of $320 to $600. Applicants had to be 18 to 45 years old and have a junior high school education.

A posting on the Dehui Web site said the company was adding two automatic slaughtering and processing lines that could handle 100,000 chickens a day, or 67,000 tons annually, for distribution nationwide.

The post said that over its first year, the plant had generated $3.4 million in income for 1,500 chicken farms, supporting the equivalent of 3,000 jobs.

Mia Li and Sue-Lin Wong contributed research.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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