China is cheaper, but should you do business there?

The recent news that China likely will surpass the United States as the world's biggest economy in 2016, some years earlier than previously predicted, was greeted by consternation in some quarters.

But it's old news in the world of dietary supplements and functional foods. China has been a major player in the ingredients world for decades, and owns the market in some sectors such as vitamins. The cost differential has been such that the question for many in the business is not whether to do business with China (and, by extension, the rest of Asia), but how?

The issue with melamine contamination really had people sit up and take notice of how ingredients coming out of China had woven their way into the fabric of the North American food and supplements system. Melamine, an adulterant used to give a falsely high protein reading on a test, is not highly toxic at low doses. But the problem showed up first in the U.S. in pet food, when pets started dying in 2007 after consuming melamine-laced food. And babies died in China in 2008 after consuming adulterated formula. In both cases the adulterated product made up the lion's share of the food consumed.

"It was a clear case of economically motivated adulteration," said Frank Jaksch, CEO of scientific consulting firm Chromadex.

The Chinese government finally was forced to move after the infant-formula tragedy.  But the fact that it took the Chinese government more than a year to take action is part of the problem, Jaksch said.

"I have never seen real action by the Chinese government to go after, or regulate in any way, manufactured ingredients that are exported for foods, beverages or dietary supplements," he said.