China vaccine maker hit by police, graft probes as scandal widens

By Adam Jourdan

SHANGHAI (Reuters) - Changsheng Biotechnology, the Chinese vaccine maker accused of falsifying data, plunged deeper into crisis on Tuesday as both police and the country's top graft watchdog launched investigations into the firm.

As public outrage over the scandal snowballed this week, political leadership in Beijing, eager to maintain confidence in China's vaccine industry, has responded with sharp condemnation of the firm and calls for swift punishment.

"Anything that touches on drug or food safety also involving children is just a huge hot button in China," said Kent Kedl, Shanghai-based senior partner at consultancy Control Risks.

People were now openly asking why authorities hadn't done more to prevent the issue, he said, adding that the government needed to show a tough stance to ensure this did not become an issue that threatened social stability.

"This is probably the highest-level of code red that the government faces."

China's drug regulator has accused Changsheng of fabricating production and inspection records related to a rabies vaccine regularly given to infants. The firm was also found to have sold 252,600 substandard DPT vaccines, a mandatory vaccine in China to inoculate children against diphtheria, whooping cough and tetanus.

While there have been no known reports of people being harmed by the vaccine, Chinese regulators ordered Changsheng to halt production and recall the product. Changsheng apologised publicly in a regulatory filing on Monday.

Changsheng's Shenzhen-listed shares plunged by their daily limit of 10 percent on Tuesday, extending falls that have seen it lose $1.8 billion or more than half their value since mid-July.

Changsheng's chairwoman, three senior executives and two mid-level employees have been taken in for questioning by local police, the company said on Tuesday. The country's top graft watchdog, the Central Commission for Discipline Inspection (CCDI), also said it had begun an investigation into the firm.

Those probes are in addition to an investigation by the securities regulator, which is looking at whether Changsheng violated information disclosure rules.

Chinese citizens have been quick to express their fury online with one discussion hashtag on the Sina Weibo microblog gathering over 600 million views. Censors initially appeared to block some posts about the case.

"The Changsheng vaccine case has created a tsunami on the internet," the state-run Global Times newspaper said in an editorial late on Monday, adding it was unrealistic to try and completely control it, though it could not be left unchecked.

"If nothing is done to manage online public discourse, it could become a festering gateway leading the country towards chaos and creating serious unpredictability."

The scandal has prompted speculation that mainland Chinese would take their children outside mainland China for vaccines as has happened with previous scandals, which could lead to a shortage in Chinese-controlled regions like Hong Kong or Macau.

The Hong Kong Department of Health told Reuters local supply of the vaccines remained stable and it would closely monitor the situation. Macau's health bureau said current supply was sufficient for residents and there was no need for concern.

($1 = 6.8204 Chinese yuan)

(Reporting by Adam Jourdan; Additional reporting by Farah Master and Anne Marie Roantree in Hong Kong and Ben Blanchard in Beijing; Editing by Edwina Gibbs)