BEIJING— McDonald's Corp. is overhauling its food-safety strategy in China after problems with a supplier hit the fast-food chain's image and eroded its sales in the country.
A pedestrian walks past a McDonald's sign in Shenzhen, China. Bloomberg News
The Oak Brook, Ill.-based company said in a statement that it will review surveillance video from meat-production sites in China and boost audits of suppliers. More than half of the added audits will be unannounced and conducted jointly by third-party auditors and McDonald's management teams, the statement said. The others will be conducted by suppliers' corporate auditors, it added.
Other steps include the creation of anonymous hotlines for suppliers and their employees to report unethical or noncompliant practices and the dispatching of quality-control specialists to all of McDonald's meat-production facilities in China, the statement said.

The moves come as McDonald's looks to restore operations in China, where it has more than 2,000 stores, following problems that began in late July with meat supplier Shanghai Husi Food Co., owned by U.S.-based OSI Group LLC.The company also said it created a new head of national food safety position in China that will report directly to the chief executive officer. The company is appointing Cindy Jiang—currently senior director of McDonald's global food safety, quality and nutrition—as interim head.
Authorities accused the Shanghai plant of intentionally selling expired meat to restaurant companies after a television station ran a report alleging the practice. They also launched an investigation into the company, which has yet to be completed, according to China's food and drug regulators. On Friday, six employees of the Shanghai plant were arrested for "selling substandard products."
Sheldon Lavin, chief executive and owner of OSI, apologized to Chinese consumers in July for the problems and said he would focus on overhauling the company's China business.
“Key lesson here is if you're a foreign company and you set up operations in China, you have to manage the operations”
—Ben Cavender, senior analyst at China Market Research Group
McDonald's also said in its statement that it is evaluating California-based Golden State Foods Corp. as a potential new supplier in China. The supplier's China division is taking over management of OSI's produce plant in the southern Chinese city of Guangzhou, OSI announced Monday.
A successful evaluation of the Guangzhou plant's new management would reignite a partnership with OSI that has been at a standstill since the July report.
McDonald's said last week it was reconsidering its relationship with OSI, its largest supplier, from which it suspended orders in China after the expired-meat allegations. McDonald's said it has in the last six weeks replaced OSI with companies such as Cargill Inc., Hormel Foods Corp., Trident Seafoods Corp. and Fujian Sunner Development Co.
The supplier switch has taken a toll on McDonald's business. The company faced a near three-week shortage of meat products in many of its stores in the region, limiting menu options and crippling sales in China, Hong Kong and Japan. Lettuce still isn't available for hamburgers in China, though McDonald's said Tuesday it signed Creative Food Group as a new produce supplier.
McDonald's said earlier this month in a Securities and Exchange Commission filing that its global comparable sales forecast for 2014 "is now at risk" because of the issue.
OSI, based in Aurora, Ill., has been an important partner to the U.S. fast-food chain. OSI helped McDonald's lay the groundwork for its expansion in China in the early 1990s. McDonald's is also one of OSI's largest customers in China, according to a Harvard Business School report.
China is a critical growth market for McDonald's and the company has already made moves this year to boost sales, which fell last year amid the country's slowing economic growth as well as negative publicity tied to avian flu and alleged overuse of antibiotics in chicken. McDonald's responded in April by announcing store remodeling and an advertising blitz. It also added new local items, such as green tea ice cream and rice dishes, to its menu.
Experts say the fallout with OSI has taught companies to take a more proactive role in operational management. "Key lesson here is if you're a foreign company and you set up operations in China, you have to manage the operations," said Ben Cavender, a senior analyst at China Market Research Group. Food companies have to play close attention to what their operations and partners are doing to maintain standards, Mr. Cavender said.