As D Johnston notes, this is old news in China — the latest in a series of food scares: milk with melamine in it, sausage made from chemical-laden pigs, and doctored baby formula. Gutter oil is only the latest food scare.
It is not widespread. Seriously. I’ve been here five years with no ill effects. But I don’t typically buy food from street vendors, unless they are regularly in the same place doing a brisk business.
Avoiding China because of food scares makes no good sense. Sorry.