Expert View: When the US calls China too capitalist, things are getting nasty

A businessman was found hanging in his factory last week. The news was lost amid the continuing market turbulence, but it is illustrative of a major story brewing in global markets. Operating out of a small town in Guangdong province, the man's highly successful company had been at the forefront of China's import penetration of the US. Until, that is, his product was found to contain lead paint. He was a victim of the latest twist in America's China-bashing.

Another week, another Chinese product recall. Wall Street was shocked when Mattel announced on Tuesday that it was recalling no less than 18 million toys it feared were contaminated with lead paint or contained magnets that children might choke on. About two million of these were in the UK. The idea of Barbie dolls and Doggie Day Care products turning into potential death traps was simply unthinkable. Mattel's shares fell 6 per cent at one point.

What shocked traders was that this news came only a fortnight after Fisher-Price had recalled 1.5 million toys also for lead paint. Indeed, while it is difficult to find a toy these days in most markets that isn't made in China, an alarming number have been involved in health scares. Earlier, in June, a million-plus Thomas the Tank Engines had been withdrawn worldwide; in April, 4 million children's bracelets were recalled.

Just as lead paint is besieging the nursery, the nasty chemical diethylene glycol (DEG) is threatening the bathroom. Last year several deaths in Central America were blamed on DEG in toothpaste. Then, last month, Spain found it in two Chinese-made toothpastes. Gilchrist & Soames recalled toothpaste with the same problem last week.

In the US, these health concerns are acquiring a political dimension. When cats and dogs across the States began dropping dead from contaminated pet food in March, the issue appeared in the presidential hustings. Hillary Clinton was cheered loudly in one recent debate when she struck out. "I do not want to eat bad food from China or have my children having toys that are going to make them sick," she said, threatening to be "tougher on China going forwards". Barack Obama, similarly, is talking about "punitive duties" on Chinese goods, and the usual canard about Chinese currency manipulation.

China-bashing appears to be good politics in America. In a recent survey of US public opinion more than 50 per cent of respondents stated that they regarded China as their country's enemy. But China's problems need to be put into context, and must not be allowed to lead to a round of global protectionism.

There are two dangerous suggestions that are being made. First, that there is something about the nature of cut-throat Chinese contemporary capitalism, and its obsession with driving down costs, that makes accidents likely to happen. This appears a little rich coming from the US. Following the Mattel recall, a Chinese diplomat, Baoqing Zhao, pointed out that there has been no shortage of US products sold in China which have had safety issues – construction and agricultural machinery as well as pork, poultry and pistachios.

Did you ever think you'd see the day when America was accusing the People's Republic of being too capitalist? As Zhao pointed out, there will always be rogue companies in any economy. It may well be that the many examples of lead contamination are traced to one supplier.

The second suggestion circulating in the US is the idea that the regulatory regime in China is not up to American standards. Here the Chinese themselves admit that they have a problem. But at least they are doing something about it. The factory inspections system is being tightened up beyond US standards, and some particularly Chinese punishments are being handed out. US critics might recall that the head of the Food and Drug Administration, Zheng Xiaoyu, was recently executed.

The current hysteria is just one more step down the path of worsening relations between the economic power of the 20th century and that of the 21st. I shudder to think where it will end.

Christopher.walker@tiscali.co.uk