Hundreds affected in milk scandal

Two traders arrested for selling contaminated milk - police

The reported death toll of babies from tainted milk in China remains at two, but hundreds more have been affected in a growing scandal that only led to a product recall after New Zealand raised the alarm.

Two traders have been arrested for selling up to 3 tonnes of contaminated milk a day, police reported.

Both deaths blamed on infant milk powder made by the Sanlu Group were in Gansu province.

Sanlu is 43 percent owned by Fonterra and has three of its directors on its board.

Fonterra yesterday said someone put the banned chemical melamine into raw milk supplied to Sanlu in what appeared to be a case of sabotage.

"Our hearts go out to the parents and the infants who were affected," said chief executive Andrew Ferrier.

One of the infants was a five-month-old boy who died in May. The other was an eight-month-old girl who died in July after her parents removed her from hospital, Chinese health ministry official Wang Yu told a news conference.

By yesterday, 1253 children had been diagnosed with illnesses linked to the milk powder, with 340 still in hospital and 53 "relatively serious", Vice Minister of Health Ma Xiaowei told the news conference. At the weekend, officials said 432 children were ill from the milk powder.

Sanlu last week halted production after investigators found the melamine in its powder was causing kidney stones and complications in infants.

The scandal threatens to batter the nation's troubled product safety record soon after the public relations success of the Beijing Olympics and following a string of scares last year.

"The Chinese dairy sector has layer after layer of problems – technological, institutional, business," said Beijing lawyer Guan Anping, a former trade official who has dealt with the sector. "The government has been trying to strengthen consumer protection, but until deep-rooted problems are addressed, increasing the number of inspectors twenty-fold won't solve them. . .The public must have a more direct, active role."

China is the world's second biggest market for baby milk powder and the health scare and public outcry may yet grow.

Sanlu vice president Zhang Zhenling offered an apology at a news briefing in Hebei's capital, Shijiazhuang, Xinhua reported.

"The serious safety accident of the Sanlu formula milk powder for infants has caused severe harm to many sickened babies and their families," he said.

Two brothers surnamed Geng were arrested for "producing and selling toxic and hazardous food," police in Hebei, the north Chinese province where Sanlu is based, told Xinhua.

From late last year they added melamine to the 3 tonnes of milk they sold on from farmers every day, the report said.

"Geng did so because he suffered losses after milk from his station had been rejected several times by Sanlu Group," it said.

Farmers or dealers may have diluted milk with water and added melamine, used in plastics, to make the protein level appear higher than it really was.

The Ministry of Agriculture launched a nationwide inspection of the dairy sector, Xinhua reported, quoting an analyst who said fierce competition had "increased quality control risks."

Local Chinese officials acted only after the New Zealand Government contacted Beijing, Prime Minister Helen Clark said yesterday.

She said Fonterra had pushed for a full recall at the earliest possible opportunity but had been blocked by Chinese local government officials.

Fonterra had approached the Government with its concerns. New Zealand then sent Ambassador Tony Brown to make representations about concerns and the national Chinese government acted fast.

"We were the whistleblowers and they leapt in and ensured there was action on the ground."