Latest Chinese milk scandal

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China's deadly toxic milk scandal has blown up again, amidst reports of a high level cover-up and revelations a Shanghai dairy company has been closed after melamine was found in its products.

In 2008 six babies died and 300,000 were ill after being fed melamine laced milk sold by Sanlu Group, which was 43 percent owned by New Zealand dairy co-operative Fonterra.

After the scandal China executed two people linked to Sanlu and vowed to clean up its dairy industry, which added the industrial chemical melamine, used during the manufacture of plastics and fertilizer, to boost its protein content.

The China Daily reported food safety authorities shut down the Shanghai Panda company last week.

Its chairman Wang Yuechao, general manager Hong Qide and deputy general manager Chen Dehua are under arrest.

China Daily says Shanghai Panda has been secretly under investigation from February last year.

It had been found to have melamine in its milk at the same time as the Sanlu scandal, but had been allowed to produce milk after it promised to improve product safety.

China Daily said in December 2008 melamine was again found in Shanghai Panda milk and officials began investigating two months later, citing documents from prosecutors in Fengxian district, Shanghai.

Shanghai prosecutor's office official Shen Weiping told China Daily that the "case was not allowed to be released to the public."

Yan Fengmin, of the general administration of quality supervision, inspection and quarantine, told the newspaper that the case was withheld because it was under criminal investigation by police.

A former director of the Dairy Association of China, Wang Dingmian, told Chinese media that the Shanghai problem was linked to Sanlu.

"Some local governments didn't destroy (tainted products) completely. Some producers recycled and sold them again illegally," he alleged.

Wang said that a feed producer told him last June that he had purchased six to seven tons of melamine-tainted milk powder at a low price to make feed.

"I just told him to watch out, that he may go to jail," Wang said.

Xinhua news agency said powder and flavouring products sold by Shanghai Panda were found to contain illegally high traces of melamine.

- © Fairfax NZ News