This week a Chinese State TV program exposed live-streamers who promoted bottles of "walnut oil" that were actually filled with soybean oil. China's latest food safety scandal highlights how pervasive fraud undermines the strategy of using high-quality to differentiate food products and earn premium prices. The case also incidentally highlights how the low price of soybeans perpetuates their oversize role in China's food industry.
 |
| Chinese State TV broadcast investigates adulteration of walnut oil. |
The "Yikoufu" brand of walnut oil was advertised by live-streamers on China's WeChat platform, purportedly sold by "People's Supply and Marketing Cooperative – Guangping Supply and Marketing Cooperative Selection." Walnut oil is said to be a favorite of Chinese consumers due to its health benefits as rich in unsaturated fatty acids. Live streamers promoting the Yikoufu walnut oil hyped the product in a "public-service agricultural support event," claiming that the oil was of reliable quality with an exceptionally low price. Five-liter bottles listed only walnut oil as an ingredient. The list price was RMB 298 per bottle, but a special "flash sale" offered it at just RMB 39.
 |
| Bottles of walnut oil were actually filled with soybean oil. |
The State Administration of Market Regulation purchased a sample of the oil from an online shop affiliated with the live-streaming channel and found that the Yikoufu oil actually exceeded national standards for saturated fatty acid called palmitic acid. The 10.5% palmitic oil content is characteristic of palm, soybean, or corn oils, while walnut oil has palmitic acid content in the 2.2%-to-10% range.
The market regulatory agency took this finding as evidence that the oil had been adulterated with cheaper oils. A local regulatory official in Jiangsu Province said the low price of the Yikoufu oil raised suspicions that the walnut oil might be counterfeit.
Investigators in Jiangsu said they traced the oil to a secluded private house in a factory complex. In a back room there were 20 drums of soybean oil, plastic bottles, labels, and equipment used to pump oil into plastic bottles for retail sale as walnut oil. After a raid, the proprietor of the workshop confessed to fraudulently packaging the soybean oil as four brands of walnut and perilla oil that he supplied to an intermediary in Shandong Province. He arranged to sell them via livestreaming platforms.
 |
| Soybean oil was pumped into plastic bottles in a back room at an industrial park |
Chinese State media commonly issue reports like this that trace fraudulent or unsanitary products back to immoral crooks operating "black den" to cheat consumers, validated by regulators and leading to prompt arrests. The exposés -- which may themselves be fraudulent -- call for more vigilant supervision and law enforcement. But they rarely note systemic problems revealed by the fraud.
Chinese officials hope to solve the problems of "involution" -- industries on a race to the bottom by turning out excess supplies of cheap generic products -- by encouraging a shift to high-quality products that fetch premium prices. They call for driving rural development by enabling far-flung rural communities to sell products that are distinctive to remote rural areas via online platforms.
These strategies are hopelessly flawed due to the ease of counterfeiting such products. It is impossible for consumers to verify health or nutrition claims for products like walnut oil, organic vegetables, pork from native breed pigs, or for rice grown in areas with special water or soil. Verification is even more difficult when products come from remote rural areas. All veracity vanishes when the promoters are live streamers--who routinely use video filters to make themselves appear to be beautiful young women and can easily fake their presence in the countryside by filming in front of a green screen.
 |
| Live streamers urged consumers to buy high-quality walnut oil during a "flash sale" |
The scandal also highlights the dominance of imported soybeans as the basic source of oil and protein in China's economy. The "black den" counterfeited walnut oil using soybean oil because it's the cheapest and most abundant type of oil available. Despite a 6-year push by Chinese officials to reduce reliance on imported soybeans, soybean oil remains the cheapest kind of oil available in the Chinese economy--where nearly all food is fried or otherwise cooked in oil.
 |
| Wholesale prices, China Administration of Food & Commodity Reserves. |
Likewise, soybean meal is the most abundant and cheapest source of protein for animal feed in China. Another program on Chinese State TV several months ago investigating soybean prices quoted a soybean crushing plant manager who stated that cost-effectiveness determines the amount of soybean meal used in feed. He observed that soybean meal prices were about RMB 2800 per metric ton during 2026--much lower than RMB 5000 several years ago--weakening incentives to follow government mandates to reduce use of soybean meal. (Prices have risen since August but are still well below their peak.) He also pointed out that there are few processing plants for alternative protein meals, and their supply is less stable than the supply of soybean meal.
 |
| Compiled from China National Bureau of Statistics. |
This week China's agriculture minister gave an overview of plans for maintaining food security during the next 5 years in which he acknowledged that China has a high volume of soybean imports for oil extraction and animal feed. He did not mention any plans to reduce soybean imports during this 5-year plan.
Comments