Home Health Products In China, scandal engulfs a big seller of traditional medicine – The Economist

In China, scandal engulfs a big seller of traditional medicine – The Economist

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THE FAKE advertisement was uncommonly cruel. Zhou Erli, a farmer from Inner Mongolia, first noticed it gaining popularity online when his four-year-old daughter, sick with cancer, was in intensive care. His girl was smiling in a photograph being circulated by Quanjian, a big health-products company. The ad claimed she had fully returned to health after taking the firm’s miraculous herbal remedies.

In fact, says Mr Zhou, bosses at Quanjian had told him to take his daughter off her chemotherapy treatment at a state-run children’s hospital in Beijing. They had offered what they assured him was a potent new cure: a drink made of jujube powder and gromwell-root oil. He had spent 5,000 yuan ($800) on it. But his daughter’s cancer had spread. In 2015, after the ad appeared, Mr Zhou filed a lawsuit alleging that the company had duped him, but the court dismissed his case for lack of evidence. Little Zhou Yang died a few months later.

Her story might have ended there, had it not been taken up by a popular online myth-busting forum, Dingxiang Doctor. In late December, in an article that went viral, the website took aim at Quanjian, which it said had been taking in billions of yuan from annual sales. It had investments in football and equestrian clubs, cosmetics, banking, insurance and hotels. The article said the firm had earned huge profits by swindling patients. It accused Quanjian’s founder and boss, Shu Yuhui, of running the company like an illegal pyramid scheme. Quanjian’s salespeople, Dingxiang Doctor said, made money mainly by corralling new ones to join, earning commission on their sales too.

The Communist Party’s palliative

Amid an online outcry, the government reacted swiftly. Mr Shu’s name disappeared from a list of advisers to the legislature in Tianjin, a northern port city where his company is based. On January 7th state media reported that Mr Shu and 17 others had been arrested. Market regulators launched a 100-day inspection of the health-product business. By March 1st more than 4,800 cases had been lodged against firms involved in it, the regulators said.

On a recent visit to the site of Quanjian’s headquarters in a semi-rural suburb of Tianjin, a lone employee said the firm was closed. Nearby noodle restaurants that once fed its staff were shuttered. Ownership of the firm’s crown jewel, Tianjin Quanjian FC (now Tianjin Tianhai), has been transferred to the local football association. The club is seeking a new investor.

It has been a remarkable fall for one of Tianjin’s health giants. A guard says the headquarters was once busy “like Tiananmen Square”. Buses from out of town daily disgorged hundreds of Quanjian “teachers”, as the firm called its senior salespeople. Mr Shu once boasted that his 10,000-bed cancer hospital was the largest in Asia. It is now shut.

In the company’s heyday, over 7,000 shops nationwide offered Quanjian’s signature “fire therapy” (patients are draped in alcohol-soaked towels and set alight). Among its popular products were “negative-ion” sanitary pads that claimed to prevent menstrual cramping and cervical cancer. The brand’s insoles, which purport to cure arthritis and heart disease, are still available online. A pair sells for 1,068 yuan.

Tianjin has been known since imperial days for health-care research and manufacturing. Tong Ren Tang, a 350-year-old herbal-medicine business, is based in the nearby capital. It is the best-known maker of traditional Chinese medicine, a system of often unproven remedies that goes back 2,500 years. Zhu Yonghong, co-founder of Tasly, a big traditional-medicine firm in Tianjin, says Quanjian and firms like it set up in Tianjin to profit from Tong Ren Tang’s aura. According to Mr Zhu, they “blurred the line” between regulated traditional medicine and outright quackery.

Quanjian’s founder, Mr Shu, first came to the port to work for Tianshi (known abroad as Tiens), a large seller of health products. The company’s name means “heavenly lion”. Two such beasts with gigantic wings flank the entrance to Tianshi’s headquarters. The firm says it has more than 10,000 staff in 110 countries. It also owns hotels, a college and a hot-spring resort. Its chairman, Li Jinyuan, a former oilfield worker, is Tianjin’s richest man. In 2015 he took 6,000 staff to France on a splashy holiday. Sustaining this are Tianshi’s machines offering diagnoses based on palm-readings. They claim to detect ailments ranging from HIV to hepatitis, for which the firm offers pricey treatments.

According to his biography, Mr Shu later set up Quanjian with 600 secret traditional recipes (he is said to come from a family of herbal doctors). A board in the entrance to his shuttered hospital reads: “To say something is real that isn’t, is deception; to make something real that isn’t, is skill.” A user on Weibo, a Twitter-like site, sums up the appeal: “Quanjian tells patients they will live when hospitals tell them they will die.”

To boost demand for its products, Quanjian devised an alluring scheme. Buying seven pairs of the magic insoles would earn a member the right to become a distributor. To innocent consumers, that seemed above-board: Quanjian has all the trappings of a legal direct-sales firm, including licences from the Ministry of Commerce (in February the ministry said it had suspended the issuing of permits for direct selling). But Quanjian’s pyramid-type recruitment method is banned. Companies that use it are commonly described in China as “business cults”. That is because gangs often ensnare jobseekers into joining. Ecstatic rallies keep alive participants’ illusory dreams of enrichment.

Local governments, eager to foster the growth of job-creating firms, have an incentive to turn a blind eye. Last year Tianjin’s said Quanjian, as well as Tianshi (which is involved in direct selling but has not been publicly accused of wrongdoing), were “brilliant national corporations” that were socially responsible and innovative. Health-product firms are among Tianjin’s most valuable companies: Quanjian paid 147m yuan in local taxes in 2017.

This causes some bosses in Tianjin’s health industry to wonder whether the authorities’ action against Mr Shu may be about more than his company’s products and sales techniques. Could he have offended a powerful politician? After all, many cases similar to that of Mr Zhou’s daughter have gone unheeded by the government. Since 2009, according to court papers, activities carried out in Tianshi’s name have been linked to 155 deaths and 2,781 cases of illegal activity (the company blames these on criminals usurping its name). On February 18th police in Tianjin rejected a case filed by Mr Zhou in which he accused Quanjian and its boss of using his daughter for false advertising.

The outcome of another recent case is disheartening. In December 2017 Hongmao Yaojiu, a popular traditional tonic from Inner Mongolia that has long billed itself as a cure-all for the elderly, was denounced online by a doctor as ineffective and harmful. Police jailed him for three months, despite public indignation (soon censored online). On his release he apologised publicly for “not thinking clearly”. On China’s social media, it did not go unnoticed that an evening news segment on the Quanjian arrests was followed by an ad for the tonic.

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