September 24, 2008

China has promised to stop the exports of contaminated milk amid a growing scandal that has seen the death of four children and illnesses in 50,000 others.

Chinese authorities have pulled baby formula and other milk products from stores nationwide as they were found to be melamine-contaminated. The toxic chemical which could cause kidney failure, was found in products from more than 20 Chinese dairy companies.

The scandal has led to arrests and the resignation of several officials, including Li Changjiang, the head of China's quality inspection agency. His resignation follows one year after both the Chinese government and he promised to vastly improve quality assurance system due to a series of product safety scares.

Countries such as Hong Kong, Japan and Singapore have banned or recalled Chinese milk products.

China has informed the World Health Organisation (WHO) and relevant governments about the contaminated milk products, according to Chinese foreign ministry spokeswoman Jiang Yu.

Jiang said the government is conducting a thorough investigation and will keep in contact with food safety authorities in other countries.

Hong Kong share prices for one of China's largest milk producers, Mengniu Dairy, plunged nearly 60 percent after its products were found contaminated with melamine.

Hong Kong-based Fulbright Securities' Francis Lun said the Chinese dairy industry has collapsed due to the scandal.

Nobody is consuming or purchasing milk products anymore and it will take a long time for the dairy industry to recover and before Mengniu can supply the milk products it has been supplying, according to Lun.

Xinhua news agency reported that Sanlu Group knew as early as June that there were problems with its milk powder but only informed the melamine poisonings to local authorities in August. The local authorities also only reported the contamination to the central government in early September, after the Beijing Olympics.